"Finance had to make sure that common sense trumped emotion" during the acquisition of the Australian department store chain David Jones, says Woolworths CFO Reeza Isaacs during an interview with CFO South Africa. "We now have to ensure that the business is focused on delivering on the deal synergies.”
Reeza is living proof that a dynamic retailer can be agile if it hires a conscientious, precise chartered accountant as money chief. "At Woolworths, finance plays a governance role. This means that sometimes finance has to say no," says the CFO, who was nominated for the CFO Awards 2015. "Discipline helps agility, even if it sounds like a contradiction."
What do you like about your job?
"I like being a CFO in retail. Retail is a dynamic environment, with an exceptionally quick pace. Feedback on how the business is doing is immediate. We get text messages every morning about how we did the previous day in terms of sales and margins across the three businesses. Sometimes quick decisions are required. As a CFO, you can impact the business and what it does quite significantly."
"Discipline helps agility, even if it sounds like a contradiction."
"Retail is very dynamic and can be very pressurised, but on the flip side it is also very rewarding. As a CFO you are at times required to put in many hours. Last year, with the acquisition of David Jones - an upscale Australian department store chain - and everything related to this deal, work was all consuming. The professional experience l gained through this process, however, was amazing and we were very proud of what was achieved. Being part of a new chapter in the group's history is very exciting."
Why are you successful?
"There is no substitute for hard work. You have got to put in the hours. As a CFO, you can't do everything on your own, so you need a good team around you. That is key. You have to make sure that you have competent people around you. In addition, you need to be strategic, yet you need to know when it is time for you to go into detail."
"Our CEO, Ian Moir, is an exceptionally good trader, but also values finance. He is a product person who understands clothing and food, and he is very focused on what our customers want, understanding what drives margins and the bottom line. We also have a very competent and supportive board, very senior, respected businesspeople from South Africa, the UK and Australia who challenge but also support the executive team. I experience this directly through the audit and treasury committees."
How big was the decision to spend serious money in Australia?
"The David Jones deal, and buying the minority stake in Country Road, were transformational, probably the most transformative decisions that we have ever had to make. The group will never be the same again. As finance, it was our job to work with our advisors to make sure that the deal metrics made sense and stacked up, and that - from a shareholder point of view - this would be reflected in increased value to shareholders."
"There were many ups and downs and there were a few points during the deal where we thought: 'That is it, we are not going any further'. In the end it all worked out fine. In a nutshell, we had to make sure that common sense trumped emotion. We now have to ensure that the business is focused on delivering on the deal synergies."
"The acquisition of David Jones had a big impact on the way we approach certain aspects of finance at Woolworths. Before the deal, we had no debt on our balance sheet. It is a big number now, but it is manageable. Profitability has always been a key focus but we have also brought in measures to focus on return on capital employed (ROCE)."
How does Finance contribute to agility?
"Woolworths is very agile. As a retailer, it needs to be. A key part of the finance role is to fund and enable strategy. We see this as one of our most important roles - as we have a business that is fortunately growing. We have to do this effectively while making sure that we follow through on due process and financial governance. We have very disciplined finance and investment processes at Woolworths. Discipline helps agility, even if it sounds like a contradiction."
What is your take on B-BBEE?
"Woolworths is very much focused on transformation. We probably have one of the most transformed management teams and boards in the country. Transformation and empowerment resonate in our entire ethos. Our chairman and previous CEO, Simon Susman was a visionary in terms of corporate social responsibility and sustainability transformation. He did these things before they were fashionable."
"If you look at our exco team, more than half is black and half is female. We also help emerging black businesses and suppliers through an enterprise development program. We also influence our supplier base and encourage them to follow the same ethos."
"We looked at the new B-BBEE codes, which came into effect in April 2015, and have said to ourselves that there are certain things that we have to do on top of what we are doing now. We for instance have an enterprise development program, which we use to fund emerging black businesses that supply us. We agreed to increase that fund significantly over the next three years. Fundamentally, it is about doing the right thing."
How does Woolworths give back to society?
"If you look at our Good Business Journey which is part of our holistic sustainability story - there are many different examples. Job creation, sustainability, the environment, education, through the MySchool initiative - there are many areas on which we are focused."
"On the issue of supplier development, it is well known that the clothing and textile manufacturing industry in South Africa has a productivity and competitiveness issue. Sourcing products from low cost centres like China is a consideration because it is more price-competitive. We do, however, actively support local suppliers. For example there are local suppliers who manufacture core products for us, including T-shirts and can do this very competitively."
"Fundamentally, it is about doing the right thing."
"One particular business started with twenty employees. We provided them with seed funding, which was invested in machinery and equipment. This company has grown to such an extent that after twelve months it had to find new premises. Today, this business owner is employing 200 people. In a sector that is battling the way it does, this is significant. We are not only creating direct jobs but also indirect jobs. We have more of such examples on the food side where 93% of our product is sourced locally."