When Simon Dingemans took over as chief financial officer at GlaxoSmithKline PLC eight years ago, the pharmaceuticals giant didn’t have a unified information technology system or standardized financial processes.
The British company was running 37 separate SAP SE software systems in Europe alone, alongside numerous other applications and programs in other parts of the world. The systems didn’t talk to each other, and data collection was often manual.
“It was completely unmaintainable,” Mr. Dingemans told CFO Journal in an interview. “The company was still very much a federation of local operating companies and we didn’t really have any centralized systems.”
Since Mr. Dingemans came aboard, the pharmaceuticals giant’s finance organization is now much improved, operating on a single enterprise resource management system that ties together a wide range of business processes in a common infrastructure.
On Monday, eight years to the day later, the finance chief will hand the reins to Iain Mackay, who is joining GSK from HSBC Holdings PLC.
“I am handing over a very energized leadership team for the finance organization to take us to the next stage, but it is probably a two or three year journey,” Mr. Dingemans said. “I am handing him a plan for a chapter two.”
GSK’s finance team, historically tasked with stewardship, governance and control, has pivoted to striving to provide insightful data needed to make complex business decisions. A more streamlined financial infrastructure means the company has better visibility into its numbers and can more easily find and free up capital across the organization.
It’s making the company much more flexible,” Mr. Dingemans said. “In a world where we have to deliver better value to patients, where we are under pricing pressure in the U.S. and elsewhere in the world, you have to think much more about your cost structure and your capital allocation,” he added.
Chief Executive Emma Walmsley, who took the helm at GSK in April 2017, is refocusing GSK on cancer treatments and away from consumer health. In December, GSK announced a plan to merge its consumer health business with Pfizer Inc. and then spin off the entity.
As part of that strategy, Ms. Walmsley has prescribed the drug firm a strong dose of cost cuts, portfolio changes and other adjustments aimed at boosting the company’s performance as it faces growing competition from generic drugs.
“When Emma came in, it was very much like: We need to create a step change in the way we think about cost and cash,” Mr. Dingemans said.
Mr. Dingemans’s pursuit of efficiency and cost savings has led him to automate certain tasks across the finance team. Software robots now perform duties related to the month-end close, making general ledger entries and helping with financial reporting and purchase and payment processes, with more tasks expected to be shifted to the robots. As a result of the automation, the monthly close is now 10% to 15% faster, Mr. Dingemans said.
GSK currently uses around 50 software robots and plans to increase that number to around 200 by the end of the year, Mr. Dingemans said. This might mean that GSK will shrink its finance team in the future.
“You would hope it would require less people to do some of the things that we used to require more to,” Mr. Dingemans said. He declined to provide an estimate of how many jobs might go.
Some analysts praise Mr. Dingemans’s efforts to introduce more structure and reduce the amount of manual data entries. “Simon [Dingemans] is credited with shepherding the organization through a time when it faced many operational changes aimed at modernizing it,” said Emmanuel Papadakis, an analyst at Barclays PLC. “He has done a good job.”
Mr. Dingemans’s successor, Mr. Mackay, will have to tackle a different suite of challenges. One priority is the company’s higher debt pile, which rose as a result of the December acquisition of cancer-drug company Tesaro Inc. for roughly $.4.16 billion. GSK’s net debt was £21.62 billion ($28.2 billion) at the end of 2018, up from £13.17 billion at the end of the prior year.
“The pace of deleveraging has clearly slowed down,” said Knut Slatten, an analyst at Moody’s Investors Service. The planned spinoff of the consumer health business could bring in some funds to reduce GSK’s debt, he said.
The new CFO also needs to free up cash to replenish GSK’s aging product lineup, said Jean-Jacques Le Fur, an analyst at Bryan, Garnier & Co. One of the company’s blockbuster products—an asthma drug called Advair—lost patent protection and now faces generic competition. “The company will have to compensate for lower sales coming from Advair,” Mr. Le Fur said.
Mr. Mackay will be tackling these challenges with a finance organization that has, over the past year, supercharged its push toward a unified, centralized data and reporting system.
“I put a lot of burden on my team, saying you got a new CFO coming in: The best thing you can do for him is to plan. You own it, as a team,” Mr. Dingemans said.