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The Financial Times FD, Scott Henderson

Scott 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.”

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