It was the move which stunned the City and left commentators speechless last year. How could Kevin Loosemore take a second major job while running FTSE 100 software company Micro Focus, which was itself in desperate need of repair?
And not just any job. The job of rescuing the historic company that prints Britain’s bank-notes, De La Rue, as it faced the prospect of running out of cash itself.
Earlier this month we had the answer. Loosemore stepped down as executive chairman of Micro Focus after 15 years at the helm of the company he built into a British technology giant.
Today, the IT veteran reveals in his first ever interview that his departure from the fallen software giant on Friday was no snap decision.
Former executive chairman Kevin Loosemore says leaving Micro Focus was ‘no snap decision’
It was ‘a long time planned’, says Loosemore, who admits the news he was joining De La Rue a week after a huge profit warning at Micro Focus last August must have looked bad from the outside.
‘It’s been in the works since 2018. What wasn’t supposed to happen is we [Micro Focus] weren’t supposed to have a trading update last August, which was infinitely bad timing. By then, it had already been lined up that I was joining De La Rue.’
For someone who has typically shunned the media, he is remarkably candid as he opens up about the plight at Micro Focus – whose value has slumped since the botched £6.5billion takeover of software assets from Hewlett Packard Enterprise in 2017 – and the mammoth task facing De La Rue, where he is now chairman.
A former boss of IBM’s UK business, Loosemore, 61, had transformed Micro Focus into a British technology heavyweight by buying up ageing software companies and squeezing them for cash.
But at £6.5billion, the HPE deal was by far the largest he had embarked on, and it proved his undoing.
‘Unfortunately, I did underestimate the challenges of integrating the HPE business,’ he says frankly as he reflects on his resignation.
‘Micro Focus will still end up being a very strong business with a huge cash flow, but it’s not as good as it should have been, which is unfortunate.’
Micro Focus’s slump last year must have been a humbling experience for a man who has been described as ‘enormously arrogant’.
One former colleague described Loosemore as a ‘very smart man’ but an ‘intellectual snob’. ‘He was not a people person. He was feared, not liked,’ they added.
Loosemore, who is a devout Christian and would say grace at company events, is defensive of his record at Micro Focus, which he led on to the London Stock Exchange in 2005 and then on to the FTSE 100 in 2016 before it unravelled.
Not even the mighty Goldman Sachs was able to find a buyer for some or all of the company
‘If someone bought a Micro Focus share in 2006 at 70p, they would have had £16 of dividends and returns on that investment, which is not shoddy,’ he says. On Friday night the shares closed at £8.02, having peaked at almost £27 in November 2017.
The shares slumped when Loosemore’s departure was revealed earlier this month – but mostly because not even the mighty Goldman Sachs was able to find a buyer for some or all of the company.
Loosemore says the company ‘genuinely looked at all options’.
‘If someone comes along with a big enough cheque and it’s right for the shareholders, it’s not management’s job to hold on to things,’ he says.
‘We believe we could probably get sales for some pieces of the business but the price didn’t reflect the true value.’
He said ‘lots of people wanted to talk to us’ when the company announced the strategic review, but ‘nothing came to a formal bid’.
He is, however, backing the company to ‘get it sorted’.
‘Once things get stabilised, it will still be a huge cash generating business, but it’s just got to get through that,’ he says.
He says American activist investor Elliott, which snapped up Micro Focus shares when they slumped in 2018 before selling six months later, was a ‘fantastic shareholder’ and tips them to return now the shares are low again.
Loosemore himself sold £11.6million of shares last summer for ‘personal finance reasons’, a year after he divorced his former wife Joy, in a move which angered investors as it came before the shares slumped.
He draws parallels between the problems at Micro Focus and De La Rue, which faces a crisis of its own.
In November, less than two months into Loosemore’s chairmanship, De La Rue, which prints banknotes and famously lost the contract to make Britain’s blue post-Brexit passports, warned there was ‘significant doubt’ about its future if its turnaround plan does not come off.
Loosemore says he contacted De La Rue last summer when the company was already under pressure and said he’d be interested in the chairman job, knowing he was already leaving Micro Focus.
He had worked as a managing director of De La Rue in the late 1990s so explains it is ‘largely a kind of emotive thing’ and there are ‘still lots of connections there’.
‘In 2000, I got a letter saying when you get to 62 you’ll get a pension. I stuck it in the drawer and thought that’ll never happen. But I know lots of people who are pensioners, I know lots of the staff and I thought, ‘I’d like to go and see if I can fix this thing’,’ he says.
And he speaks frankly about fears that the business might collapse when he joined: ‘That was part of the risk of taking the challenge on because I think that’s the direction it was going, to be honest. At which point you may say well I’m mad.’
He says it was ‘obviously a huge blow’ to lose the passport contract to a Franco-Dutch company and wonders whether that would happen in ‘any other country in Europe’.
He’s also open about the job cuts the business needs to make to survive. ‘What we’ve said to the staff is we’ve now got to get to the point where we live within our means, which is you have to earn as much as you spend,’ he says.
‘If you and your family spent way more than you earned, and you maximised your mortgage and sold off some of the family heirlooms, at some point you have to start living within your means. And that’s kind of the reality [at De La Rue].’
He hits out at former management for not listening to outspoken investors such as Crystal Amber’s Richard Bernstein, a vocal critic of former chief executive Martin Sutherland and Loosemore’s predecessor Philip Rogerson.
Loosemore says he spoke to Bernstein the morning he was appointed.
‘[Bernstein] expressed his frustrations that certain things had been done wrong and that Crystal Amber weren’t really being listened to. And I think he was quite surprised when I said, ‘Yeah, I agree’.’
He adds: ‘My view of activist investors over the years has always been embrace them because if someone’s got a good idea it’s a good idea. Don’t worry about where it came from.’
Despite his initial ire at not being consulted when Loosemore was hired, Bernstein is now backing Loosemore and new chief executive Clive Vacher to turn things around.
The trick, Loosemore explains, will be for De La Rue to start making money in the bad years and then ‘really good money’ in good times.
Of the task ahead, Loosemore says: ‘I’ve seen nothing that has convinced me it won’t be really difficult, but I’ve seen nothing that has convinced me it can’t be done.’
Whatever happens, it certainly is a case of out of the frying pan and into the fire.
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