RSS feedsScott Henderson is embarking on his second year as chief financial officer of the Financial Times. And there is good reason to believe that this could be the most challenging year the youthful Canadian has yet faced in his career.
Finance professionals and business executives are heading back to their desks after the Christmas break with the nagging worry that 2008 could prove to be a tough year. If the hawks are right, then the wobbles in the market in 2007 caused by the credit crunch are just the overture to a broader slowdown. And that could make things very interesting for the pink ’un as it is so reliant on advertising revenues.
For Henderson there is a sense of déjà vu about standing on the precipice of a market slowdown. He moved to the Financial Times, in a more junior role, in 1999 because he was excited by the opportunities of the technology boom. He remembers the sense of excitement that pervaded the corridors of the paper’s riverside headquarters. “Back then, it was all about building websites and seeing if people would come. And they did,” he says.
Nine years ago, times were good in the City with markets soaring and bonuses bulging. The FT was doing equally well, with its coffers bulging with advertising revenues as companies spent a fortune in the rush to establish their brands in the new digital marketplace and a hiring boom meant that there was a flood of recruitment ads.
Rock bottom
Then the internet bubble burst and both the City’s fortunes reversed with high
levels of redundancies and shrinking investment banking profits. The FT
’s fortunes mirrored that of the City’s and when the FTSE-100 hit rock
bottom in 2003, the Financial Times notched up a loss of £32m, as advertising
revenues fell almost two-thirds from their peak in 2000.
Those early years of the new millennium were a time of belt-tightening and introspection. In Henderson’s opinion those lean times were crucial to the long-term success of the paper. “Instead of just thinking about building new sites, we switched our attention to how to make money.”
One of the biggest changes over the past few years has been the integration of the paper with the website so that the two work seamlessly together. There has also been considerable investment to ensure that there is the technology in place to support the smooth working of the website as well as integrating lots of sites all into the main FT.com site.
The hard work has paid off: the paper has seen its circulation rise; an achievement not to be underestimated when the trend for newspaper sales has been down for the past few decades.
But it is the website’s advertising revenues that has notched up the best performance. The focus on the website has seen FT.com’s advertising revenues up 50% compared with this time last year.
Most consider the media industry to be a young and dynamic business sector, but there are sections that are quite conservative and resistant to change. “It took a long time for fairly conservative media buyers to understand4 the online environment and to get the budgets to start to shift. Now we’re even starting to tap into television advertising budgets,” says Henderson.
After experiencing the highs at the start of the millennium and a couple of years of the bad times, he moved back to work for Pearson, the publishing giant that owns the FT along with other well-known brands like Penguin, in 2002.
His role at Pearson was very different from the one at the FT. “ Pearson operates on a much bigger stage. It has the capacity to invest much larger sums of money. My role there was much less about business development and much more about buying companies that filled gaps in the Pearson portfolio.”
Henderson considers his time at Pearson working in M&A as an exciting and highly educational time. “I think these skills are vital for people who want to have a long career in business. Buying businesses to fill gaps in your portfolio is an accepted way today to build your company, rather than just focusing on business development.”
And deciding which business will fit within the portfolio also means that
finance directors are forced to understand their own businesses better. “I think
the ability to price, acquire and integrate acquisitions is vital for today’s
finance director.
“To make the right acquisition, a finance director needs to have a deep
understanding of their own company, be prepared to sift through a lot of frogs
and be honest with people about your interest in their company.”
From print to online
Henderson has taken the lessons he learnt at Pearson and applied them to the
FT. “Six months ago we sat down and looked at our online recruitment
business. We have a big print recruitment business and we’ve tried to build our
online recruitment business several times without much success. We decided the
only way forward was to acquire an online business,” he says.
The FT acquired a UK start-up company called exec-appointments.com which has created its own technological platform for online recruitment of senior executives. The company has designed the website so that executives can find the jobs that would interest them with a few clicks of a mouse. The recruiters can directly place ads on the site and monitor how many people are looking at the ads. “The combination of that platform with our brand and reach is almost a no brainer; it’s going to work.”
Henderson says that by putting the weight of the FT advertising sales force behind this technology and rolling the product out across the FT’s bureaux will help it to tap into the global recruitment market.
Investing in online recruitment now makes good strategic sense. Online recruitment will increase in popularity as the younger generation of business executives that have spent all their lives using computers grows up, he explains.
The FT’s ability to make targeted acquisitions like exec-appointments.com reflects a new era of optimism at the paper. “If you were to wander around the building, you would leave with the sense that the FT is ‘in the zone’. The business is firing on all cylinders. Circulation and advertising is up, and the recent redesign has gone well. On a number of levels, the business is performing better than it has been for a number of years.”
The current turmoil in the global markets has helped to provide the paper with a rich vein of news to tap into. But there remains lingering concerns that while the FT may be doing well out of the current market jitters, it could suffer if the crisis in the market deepens.
Henderson seems unperturbed by such concerns. “We like volatility. It’s a time when people need us and when we are more valuable to them and that helps us to build our business,” he says.
Things really are different this time; the FT has taken on board the lessons from the last downturn in the financial markets. “We now put money into the areas that we know the FT will be involved in come good times or bad so it’s that much less likely that we will abandon those investment plans. For example, we will continue to invest in executive advertising and killer content.”
There are fewer uncertainties now than there were seven years ago. “Today we are using better known technologies and we are using them to support business models that we understand. Back then, we were building the technology and4 then figuring out the business model. There is still risk but we have a much better idea about what will work today than we did,” he says.
The exponential growth of the internet has presented an enormous challenge to news organisations around the globe. The media revolution has led to an explosion of news sources. The huge volume of information available means that emphasis has shifted from getting the story to sifting the information.
This provides an opportunity for the FT: time-poor executives don’t have time to sift through all the information available on the web but the FT can point to the best sources.
One of the FT’s most popular blogs is Alphaville. This provides commentary throughout the day on market activity. On the left-hand side of the page is a list entitled “Blogs we are reading” a perfect example of the FT applying its editorial abilities to help its users make sense of the many-headed hydra that is today’s world wide web.
“There isn’t any monopoly on intelligence and we don’t mind pointing people towards that stuff. It supplements and strengthens what we do,” says Henderson.
Keeping everyone happy
He admits that the best part of his job is planning and investing in the future
of the FT brand. But, unlike finance directors at other companies, he
has to keep the board of the Pearson group happy, as well as his own board.
Coming up with the annual budget for the FT is a process of negotiation. “The bulk of business revenues come from advertising. That’s quite easy to predict as there are a number of studies that are conducted over the course of the year. The discussions really focus on how much of these revenues are then re-invested in the development of FT.com and how much Pearson expects to receive.
“Today we are a print business with a digital future and we are going to become a digital business with a print legacy. That is going to take money and time. And we have to keep them apprised on how we are progressing towards that aim and discuss whether achieving by investing in capex or making some key hires,” says Henderson.
While the downside to being a part of Pearson is that he has to relinquish a
certain amount of control, there are advantages to being a part of the group: as
Henderson puts it, the heavy lifting on issues like pensions can be left to the
main group.
But that does not mean that he can completely dodge all of the more mundane
tasks of a finance director. There are still internal audits and quarterly
reporting. The trick as far as Henderson is concerned, is to carry out these
tasks as efficiently as possible.
He takes his lead from Pearson CEO Marjorie Scardino: “She wants less information of a higher quality so she can zero-in on the decisions we have to make, make them quickly and get on with things.”
Making rapid decisions will certainly stand Henderson in good stead in the
coming year. Along with challenges posed by uncertainty in the financial
markets, there is another threat to the newspaper: Rupert Murdoch’s decision to
acquire The Wall Street Journal.
There are good reasons to be nervous. Murdoch’s recent reshuffle of his media
empire, made one of his most trusted lieutenants, Les Hinton, the chief
executive of Dow Jones, The Wall Street Journal’s parent company. This was
interpreted by analysts of Murdoch’s intent to take on the FT.
Henderson shrugs off any possible threat posed by The Wall Street Journal. “He’s giving the paper away today in Europe so he can’t compete on price. That’s alright by us. The people who read the FT aren’t enticed by saving a pound here or there; they buy the paper because they need the analysis to help them make better decisions,” says Henderson.
But he is not complacent about the challenges that the FT continues to face. “Keeping the business as fleet of foot as possible is vital. We need to be able to keep developing our business at the speed that younger more nimble businesses are moving. We have to turn our size into a strength, not an impediment.”
