The Aussie chief leading troops into battle for defence spend
Ex-army man turned yoga-loving FTSE boss on fighting a fraud probe and striking deals
FEW chief executives are used to mucking in with the troops, but Michael Flowers had first-hand experience of the trenches before reaching the ivory towers of FTSE leadership. The Australian-born head of Ministry o f D e fe n c e s u p p l i e r C h e mr i n g , a £600 million company with 2600 staff and six sites across the UK, was part of Aussie forces sent into East Timor to quell violence between militants and independence fighters in 1999.
As a lieutenant colonel, he drove operations under the command of General Sir Peter Cosgrove as peacekeepers swept through the tiny territory to restore order amid 1400 casualties.
“It wasn’t particularly dangerous for me when I was there but there was a thought that it might be at one point…” he recalls, adding with relief that he was never shot at.
Life in a conflict zone left him wellprepared for Chemring, which crashed to earth in 2012 after becoming a seminal go-go stock of the mid-2000s’ military-spending boom. Big American spending in Afghanistan and Iraq had driven the Hampshire-based manufacturer of decoy flares and pyrotechnics to heady heights but the wheels came off when US spending plunged to its lowest global share since 1960.
A string of profit warnings and a revolving door of CEOs, not to mention a botched private-equity takeover offer from Carlyle, put the company on its knees, leading to big losses and a painful rights issue.
Flowers, who joined Chemring in 2006, was helicoptered in in 2014 after the company infamously ditched its then-boss Mark Papworth after 18 months due to his lack of military experience. No one could doubt Flowers’ military spurs. Six foot six, broadshouldered and tanned, a result of weekend City breaks away to his favourites haunts of Sardinia and Sicily, he certainly looks the army type, diminished only slightly by his sober lightgrey suit and plain grey tie.
Four years after taking the helm, the 56-year-old could today be forgiven for breathing a temporary sigh of relief after putting the company on the right track, with shares up 20% this year.
The eye-watering debt pile he inher-
The stakes are much higher in the military environment than they are in the business environment. Much higher.
ited has been slashed and he’s even considering M&A for the first time — a sign, perhaps, that normality is returning to one of Britain’s defence jewels. “It’s taken longer than I would have liked,” he admits. “But we are just in a nice place.”
With his sergeant-major’s checklist, Flowers ushered through the £80 million rights issue to halve debts and merged or closed US factories, including plants in California and Philadelphia. More money was thrown at working capital so suppliers could be paid more promptly to speed up the supply chain.
Chemring specialises in making consumables — cheap, easily replaceable munitions that are the equivalent of a Brita water filter or a Gillette razor blade — such as the pyrotechnics for the Martin-Baker ejection seats used by the RAF and decoy flares and chaffs for fighter jets, including the new Lockheed Martin F-35.
About 60% of sales come from pyrotechnics, 25% from flares and the rest from sensors, including a giant mine detector known as a Husky. Flowers says the segments may even out to onethird each by 2020 because of softer pyrotechnic markets and increasing countermeasures.
“There’s a big focus on organic investment,” he says, pointing to spending on a flares factory in Tennessee.
Sales bounced 15% last year to £550 million, the highest since 2012, and shareholders are happy. A top-five Chemring investor praises Flowers for bringing “focus and discipline” to the unwieldy group.
Yet it’s not all sunshine. Chemring revealed in January that the Serious Fraud Office was investigating a subsidiary, Chemring Technology Solutions, over bribery, corruption and money-laundering allegations involving middlemen on two unspecified contracts dating to 2011.
Chemring says it went to the SFO itself, and Flowers downplays the probe — but it must have damaged the company’s standing? “I don’t think it’s put back our reputation,” Flowers defends in Chemring’s tiny London office on Lombard Street, within earshot of St Edmund’s church. “Companies live or die not by what has happened, but on how positively they react. If something less than desirable happens, then you are fully upfront and try to work with the authorities and affected organisations to resolve it.”
More important are so-called nearpeer conflicts like North Korea and Russia, which Flowers says are overtaking counter-insurgency threats on the minds of military bosses. As tensions between the White House and Moscow escalate over Syria, Flowers could be forgiven for rubbing his hands together when considering the “Trump bump” in defence spending.
He goes on the road once every six weeks to meet military bosses — he’s met the last four directors of the CIA — in a bid to stay plugged in to the spending whims of top brass and anticipate where to build up his next production line.
So, striding around the corridors of power in Washington and Whitehall, he must come across his fair share of spooks? “No, I don’t go anywhere where I have really any exposure to the intelligence-type people or spies or anything at all like that,” he replies, almost per- plexed by the question. “That darker side that people envisage, I really have no exposure to and I’ll happily leave it that way.”
With Trump increasingly pushing the US onto a quasi-war footing, such refillables should see a surge in orders. “Any time there’s a heightened threat, people look at their insurance policies, which include their military capabilities,” Flowers says diplomatically.
He joined the army as a 17-year-old, influenced by his brother-in-law, who was in uniform, and stayed for 22 years until he left to join BAE Systems.
HE may be officer class but in conversation, he has a typically loquacious Aussie patter and no-nonsense style. “He’s a people person and he’s been good for the company,” says one City source who has worked with him. “He’s well-liked within there. You can’t say that with many CEOs. Obviously, he’s Australian so he can be pretty direct. He’s quite a tough cookie in negotiations when he wants to be.”
Based in Winchester, a short drive from the company’s headquarters in Romsey near Southampton, he’s married with two daughters. He says he was “probably boisterous” at school — the Christian Brothers College, St Kilda in Melbourne, where he shared a classroom with News Corp chief executive Robert Thomson — and was by his own admission a “second-class honours degree, definitely not a first”. But he found his feet in the military.
He may have a military background but he’s not macho, dropping his guard later to open up about what it’s like to run a FTSE company. “There’s quite a lot of stress associated with the position,” he says quietly. “I think I manage it pretty well. Generally, I can manage the stress.”
He’s just started going to a “guys-only” yoga class, not for the stress but because his wife and daughter “ganged up” on him, he chuckles. “I am probably the most awkward person doing yoga. It’s a damn sight harder than it looks.”
His game is Aussie rules football. He played a bit when he was younger but he is only a spectator now, supporting his beloved Richmond — who, he points out, won their first league title in 37 years last year.
CEOs and bankers are used to likening business to war, so pay heed to a man who knows both. “The stakes are much higher in the military environment than they are in the business environment,” he says. “Very, very much higher.”