Interview: Veolia UK CFO David Gerrard

THE BRAND VEOLIA isn’t exactly an evocative one; it’s no Heinz or Rolls-Royce. In fact, you’ll probably struggle to remember where you’ve seen it. But you will have, particularly if you travel or live around London.

As a £1.7bn business, by UK revenues, it’s certainly substantial. You’ll know it better from its now defunct divisional brands such as Onyx and Connex, the former being its waste and recycling division, the latter known for its ill-fated foray into UK train services.

Now, Veolia, a French-based business boasting global revenues of more than €29bn (£20.5bn), runs many London council waste, recycling and energy services through its UK operation. Glance at a bin lorry or recycling truck and you may well see its red and white ‘droplet in a circle’ logo emblazoned. And what was a series of divisions operating under an umbrella is now in the process of becoming truly cohesive. And this is where UK CFO David Gerrard comes in.

A company veteran, he joined through Veolia’s acquisition of then-Brambles business Cleanaway in 2006 as the unit’s FD. “I’ll be honest with you – I thought Veolia would say, ‘Thanks very much’, and I was looking forward to a summer playing golf and then going on to do something else. But they persuaded me to stay, and I was impressed by their persuasion,” admits Gerrard.

Three years later, he was promoted to the waste management divisional CFO role.
But while things were ticking along for Gerrard career-wise, not all was well at Veolia. Its US unit uncovered a $111m (£71m) accounting fraud, while Veolia suffered an existential crisis – precipitated by a combination of heavy debt load and poor market conditions post-credit crunch.

It made hundreds of millions of dollars in write-downs and impairments, sold off businesses, and re-trenched. Its core businesses – waste, water and energy ‘solutions’ – now operate as one.

Getting to know each other

“We were all part of the same international group, but having said, that we didn’t know each other too well,” says Gerrard. “It’s been a gradual change so they now collaborate. It’s been quite a tough journey. We had three separate companies, three separate systems, and we’re getting to where we act and feel like one business.”

Efficiencies are inevitable in such a process, but the biggest challenge has been a cultural one, he reveals. “People tend not to like change,” Gerrard says dryly. “So getting people to jump on board and get behind this ‘one Veolia’ business … you can reorganise, do your organisational charts and whatever structure needs doing, but actually getting people to act like one has been quite something.”

Challenge or not, the stark business reasons behind the reorganisation are compelling. Providing customers with, for want of a better term, ‘end-to-end’ energy and waste solutions is an attractive proposition. Removing divisional duplication within Veolia also lowers the cost base.

Customers often had the dubious pleasure of having to meet different account handlers from the different divisions, Gerrard explains frankly.

We want one Veolia

“AstraZeneca said to us: ‘Why can’t we deal with one Veolia? Why do we have to have different parts of your business come and talk to us all the time?’ So with a lot of customers, it’s been great [to change], to showcase what we can do and offer more value-added services. Not every customer will want all, but a lot – and a growing number – want a combination of those three,” he explains.

Such change – the impact of centralising internally and projecting that outwards – must surely have kept finance very busy?

“The operating business has just started to working together. Bringing the whole thing together doesn’t happen overnight,” says Gerrard.

It was a case of “three ways of doing things: three different payments, three times a month”.

The waste and water divisions were brought together first, systems-wise. “The whole accounting, payroll, front of office … all systems were essentially different. We’ve now got two of the divisions on the same financial system and the third coming on board in January,” he continues.

Management reporting has also been a key area of focus. This, Gerrard explains, is where telling the business how it is performing – as a whole – comes to life, whether that be through performance or savings.

“We’re back to that ‘culture thing’. We now talk about the result of the business as a whole. We’ve seen people develop with this new organisation. It’s great when you see that, but it’s not been without its challenges – on the people front, there were parts of the business where we had duplication,” he says.

Innovation management

Another key area for finance is in its support of Veolia’s new projects and innovation. As its raison d’être is to help create a circular economy for clients (where resources are used for the maximum time and efficiency available, then recycled), it is in a constant search for new ways to do things.

“Every part of our business is about providing sustainable solutions and building on this idea of a circular economy, so we’re [all] going to have to be a lot more resourceful than we have been in the past,” says Gerrard.

Where finance gets involved is in helping the business project forward its various options and ideas: “We’re excited and we’re energised about these different processes we can offer the customers, these different solutions – but they’ve got to work.”

Understanding the financial implications from concept to post-investment is where finance adds value, he points out.

One idea that has come out of Veolia’s innovation forum, which Gerrard has himself sponsored, is a project to recycle flatscreen TVs: “We are struggling to come up with a model that really starts to look attractive. We don’t want to do it if it’s on a relatively small scale; we’re interested in scaling things up.”

Financial Director asks, somewhat idealistically, whether it has to come down to a financial metric?

“I’m not going to be as excited about a new venture if it’s not going to make any money,” Gerrard says bluntly. “Most of them don’t in the early years and that’s fine; we model it like that. We’ve got set investment criteria, and I guess that’s another place where finance plays its part: in controlling the investment decision. They have to meet the criteria because that’s good business practice.”

Finance “doesn’t do anything crazy”, suggests Gerrard. It too went through a reorganisation post-divisional merger. A shared service centre is based outside of Birmingham, while a number of Gerrard’s team operate within its service lines. “The central guys” look after more technical matters such as statutory and group reporting, tax and treasury.

Reporting woes

Mention of statutory reporting invokes an “I’m glad you asked me that” response from Gerrard. It is difficult to tell whether this is sarcastic, seeing as this is a topic he has plenty to say about.

“We have quite a complex group: many statutory entities which need accounts filed. I’m not sure how widely used those accounts are. And I think we continue to make them more and more complex. It’s very onerous on organisations,” he comments.

“The ‘business’, or annual, report gives more of an understanding of Veolia UK’s direction of travel. It’s us telling the world what we’re doing, the whole. I don’t think that suits a set of statutory accounts, which are becoming bigger and bigger – and people don’t really want to read them.”

The Veolia name may have some negative headlines attached to it over the years, but no more than most outsourcing and contract management businesses. In the UK, a scouring of the internet brings little in the way of vitriol. It goes in tandem with the lack of brand recognition Financial Director referred to earlier.

Gerrard sees this as symptomatic of the way the business works among its client base and communities. “We are genuine in what we try to do, whether that be for commercial organisations or local authorities. We’re B2B so we tend not to be as visible,” he explains.

“We might not be the sexiest organisation in the world in what we do, but I think that what we do, we do very well.”

Planning risks

But the nature of its work means that opposition to some of its plans is inevitable, creating a CFO-sized headache. An energy recovery facility, which burns waste and converts the energy into power, costs Veolia a cool £150m to set up. Gerrard believes that local opposition to such plans is “unfair” and a “frustration”.

“They’re a small power station. Objectors to these plans will call them waste incinerators and expect to pull back the doors and find a huge raging bonfire, but it’s nothing like that.”

As a prime example, the Department of Communities and Local Government (DCLG) has just upheld its earlier decision to block a 380,000 tonnes-per-year energy-from-waste plant near Hatfield. The local council had also opposed the scheme.

“If we don’t develop that solution, it’s going to cost them more than the £150m that they need … the alternative to that [plan] is landfill, and landfill is very costly and not anywhere near as environmentally friendly,” he says.

So how do these external factors become factored into planning, budgeting and forecasting?

“Another example would be Staffordshire, where we worked with the client, the site was selected by the client, and it had outline planning permission. The risk there was much lower and went through relatively easily,” he concludes.

David Gerrard CV

2009 – present CFO, Veolia UK
2006 – 2009 FD, Veolia UK
2004 – 2006 FD, Cleanaway
2002-2004 FD, Aramark
1991-2002 McDonalds various roles, including MD, Aroma Ltd