Slipping profits, sliding shares and the sudden departure of ebullient chairman Dick Oster have unnerved Cookson's investors. Will the low-key style of the company's likeable new chief executive, asks Andrew Davidson, have a steadying effect?
It is Christmas at Cookson plc and Stephen Howard, the company's new chief executive, looks confused. 'I've got to admit,' he says, gesturing round at his fourth-floor London office bedecked in cards, 'I never got this many before. I ask myself, who are these people sending me all these cards? Then you look at the fine print, and it always says "we will be calling shortly to share with you some of the ideas we have for your company". Aaargh.' Howard lets out an effective mock-groan then gives me a small grin. There are perils to being a new boss but I get the impression that this particular 44-year-old American is rather enjoying it.
He has just flown in from the east coast, Christmas-partying and geeing up the troops on the other side of the pond, and if I had been hoping to catch him with his guard down, exhausted and jet-lagged after a night on the red-eye, I am disappointed. He keeps me waiting 35 minutes, for which I forgive him, because it is Christmas, but when we eventually shake hands he appears as bright and bouncy as if he had just snoozed his way across the Atlantic on the QE2. Thin, medium height, balding, with a thoughtful face and a boyish smile framed by a long brown moustache, Howard has a warm, low-key manner that immediately puts you at ease. He whisks me round his office. Scenes of sailing and shooting decorate the walls, lines of business books run along the window sills, those cards - fat Santas, exhausted Wise Men - hang off every corner. We sit round his desk and he sips a small bottle of mineral water while we talk.
First, he has some explaining to do. Cookson, which describes itself as a 'international specialist industrial materials group' (it makes plastics, ceramics, electronics and engineered products), is in fact one of Britain's oldest industrial companies, with a heritage that dates back to one Isaac Cookson, who produced iron, glass and salt from his Newcastle base in the 18th century. It has survived in various forms, mainly as a producer of lead, through any number of wars, from the Napoleonic to the second world war, and seen more booms and busts than a Conservative chancellor. After another dramatic growth spurt in the 1980s, when Cookson rushed round America buying all sorts of industrial companies, it fell back, leapt forward again, then two years ago hit another bumpy track, with its profits slipping, its shares sliding, and the company, which boasted a near £2 billion turnover in 1996, eventually tumbling out of the FTSE-100. It culminated in a boardroom shake-up last October that saw Howard clinch the top spot and his high-profile American predecessor Dick Oster, architect of Cookson's 1990s revival, move up to chairman. Then in December, it was suddenly announced that Oster was standing down immediately, and Cookson's old chairman, Robert Malpas, was stepping in again until a replacement was found. This was all the more surprising when you consider that Howard was widely seen as Oster's close friend and protege. What is going on?
'I know,' sighs Howard, 'people are searching for reasons and asking if there was a big falling out, but in fact there were no personal problems.
It is just that we had different views on how to go forward. Dick was a very hands-on chief executive, and he was finding it difficult to adapt to the role of chairman. We also had different views as to the cost base and role of the centre ...'
In other words, as was widely rumoured, whether the company's head office should be relocated somewhat closer to Oster's Rhode Island home? Howard smiles and nods, yes, the nationality question was an issue. It seems that Cookson, which has become increasingly American over the past decade, has studied the option of leaving Britain pretty closely. Oster, who declined to return my calls for this article, apparently favoured making the split, in some form. Howard didn't. It was as simple as that.
'We are owned 80% by British institutions, they are the owners of this company,' says Howard firmly. 'They are a very loyal shareholder base, people who know where we have come from and where we are going. You have to be very careful to turn your back on that sort of support.'
But shouldn't all this have been thrashed out before Howard and Oster changed roles in October? Howard shrugs. 'Had we known, and he known, none of us would have done this. We discovered early on that it was going to be difficult for him, so we decided that, rather than prolong the difficulty, we would deal with it.' Oster, an ebullient figure who had long been one of the best-paid chief executives in Britain, left with a £2.9 million pay-off to add to £2 million-worth of shares and options, the result mainly of agreements that went back to 1978 when he joined the company after selling his family business to Cookson. It was the second big Cookson payoff of the year. Only five months earlier another executive, former joint managing director Don Carcieri, who had been Howard's rival for the top job, left with a £2 million package.
Now Howard needs to steady the ship and convince sceptics in the City that Cookson has found the right man for the future. In particular, shareholders want to see a change of style from the Oster formula, which one merchant banker describes wryly as 'management by bullhorn' - shouting optimistic targets in the City, then demanding your managers hit them. Howard is an altogether quieter figure, with a reputation as an articulate business thinker but also with real experience on his side - he has run Cookson's ceramics and engineered products divisions on his way up, and participated in a number of the group's major transactions. And he comes with a plan: a likely reorganisation of Cookson which will be announced before Easter. He is not saying much about it at the moment, but he admits that it was another of the key elements in the split with Oster. In short, Howard may want to sell at least some of what Oster built up.
But what? Cookson is a curious company. For most of its 300-year history it has generally concentrated on one main product, lead (hence the company's old name, Lead Industries Group). In the last 50 years it has diversified off that into areas like glass, ceramics, solder, electrical parts, and precious metals. That concentration was diluted after the diversifications of the 1980s (when it reverted to the family name, Cookson). It was virtually abandoned after Oster, appointed chief executive in 1990 following Cookson's near collapse, started rebuilding the company. By the time he stood down as chief executive last year it had become a rather eclectic four-division group employing 13,000 people across 30 countries, producing a vast range of materials including fibres for carpets, glazes and stains for tableware, ceramic products for controlling liquid steel, dental products for health markets, laminates, plastic pallets and a host of other things, some related to the core business, others less so. At one stage Cookson even became the world's largest manufacturer of plastic flower pots. But eventually confidence in Oster's strategy was dented, first by abortive merger talks with Johnson Matthey in 1994, then by a sharp drop in 1996 pre-tax profits (from £168 million to £45 million after exceptionals), caused by the downturn in the semiconductor industry. Other worries immediately kicked in. Was Cookson really a sprawling conglomerate in disguise? Were the rumours true that Oster wanted to move the company to America?
All of which leaves a pretty large shadow hanging over Howard as he tries to establish himself at the helm. Which bits will go first? He is not saying but he agrees that some degree of rationalisation is likely.
A bit of selling, some re-labelling to create three divisions out of four (plastics into engineered products, perhaps), a possible management reshuffle, a reorganisation of the London head office (which will move to London's Strand), and a spate of public relations to get rid of the deeply unfashionable 'c' word - conglomerate - are on the cards. Focus? It's already there, says Howard.
'One of the difficulties I am battling with as CEO, apart from the uncertainty over currencies in Asia Pacific, is that we are still trading under a holding company discount, we are seen as a conglomerate. But a conglomerate is someone in a bunch of diverse businesses, and there is actually a great deal of overlap in what we do. By and large we sell intermediate, value-added speciality materials to other industrial companies which make things.
We sell to electronic companies, building companies, automotive companies - it runs across the board. I laugh when analysts say "You should be more focused". Pick any five electronic companies and ask if they are more diversified.'He leaves the implication hanging as he takes another sip.
But, according to others, it is not so much the diversified structure of Cookson as the very arcane nature of much of what it makes that has hampered it in the past. 'The fundamental problem the company has,' says one of its City advisers, 'is that it doesn't manufacture anything you can buy in the high street. Hence you have got to invest a lot of time in understanding what it is about, and consequently it is not a company where goodwill is easy to generate. It is an inherently complicated business to understand.' In the past, he adds, Oster's sheer verve and the company's tremendous share performance (outperforming the market by 100% between the early and mid-1990s) carried investors along. The City, after all, likes a showman - until the first cracks appear. Then the race to get out of the stock is usually fast and furious.
The same adviser says that Howard's style - calm, thoughtful but approachable - will quickly settle the nerves of institutional investors. Howard himself ascribes his down-to-earth manner to his mid-western upbringing. The son of a Ford Motors executive, brought up in Detroit, the eldest of four siblings, he majored in economics at Michigan State before training as a lawyer.
A first job offer took him to a practice in Rhode Island on the east coast where, within his first few months, he found himself working for two acquisitive British multinationals. One was BTR, led by John Cahill. The other was Lead Industries Group (renamed Cookson in 1983). By 1985 Howard had job offers from both companies. He plumped for Cookson, he says, simply because Oster, then head of its American division, made a better job of selling the move to him. 'Dick always realised that Stephen had considerable potential,' says Cookson chairman Malpas. 'Stephen's got a good brain, he takes everything in his stride, he's capable of excellent analysis, he generates a good team spirit, he listens to advice, he has got huge powers of articulation and presentation. And he is always a pleasant guy to be with.' Even so, jumping from law to business is quite a leap.
Was he scared? Howard shrugs. 'I wasn't unhappy as a lawyer and I knew full well that in the corporate world it is fairly easy to have your name crossed off for things out of your control, but Dick wouldn't take no for an answer. He is a fairly persuasive guy, you know.' And he thought he could always go back to law if he hated it. Any regrets about refusing BTR? No, he smiles, and anyway, he learnt a bit off working with Cahill too. Such as? 'Management gets what it tolerates,' replies Howard, with a grin.
And he loved it. After five years in legal affairs and corporate development, Howard was given operating responsibilities for Cookson's engineered products division. According to Malpas, his performance there was so impressive it could not be ignored. 'He took precious metals from strength to strength, making it consistently one of the profitable businesses inside Cookson even though many of the competitors couldn't even make a fist of it,' says Malpas. He then repeated the trick with the ceramics division, where he oversaw the growth of Cookson's highly profitable advanced refractory business, Vesuvius. Hence, says Malpas, the board had no doubts at all about offering him the chief executive slot, even at the tender age of 44.
But Oster's recent exit has left loose ends to be tied up. When we met, Howard was already locked in negotiations over the future of Cookson Matthey Ceramics, the company's joint venture with Johnson Matthey. In recent years profits have slumped, mainly because the price of zircon, a key ingredient in tile-making, has dropped to a 20-year low. Howard wants ownership sorted out. 'It makes more sense in our portfolio than theirs, but they may be under pressure to keep it,' he says. By the time this article comes out, the issue may be resolved. And then there is the issue of strategy. City analysts, who have noted Howard's promotion with cautious approval, want increased focus to deliver greater shareholder value. They say Howard faces some tough choices: first, what to do with the plastics division, in which most of the subsidiaries are niche businesses; and second, how to reconcile engineered products with the long-term future of the group. Precious metals, in particular, makes tremendous profits but will it fit with the future focus?
Howard is confident that he can satisfy their demands. He has a clear idea of the sort of business he wants Cookson to be in. 'We want to be a global player, operating in growth markets, technology-driven, with an order-of-magnitude differentiation.' In particular, he wants to concentrate on businesses with sustainable returns in excess of the cost of capital and good cash generation. Against that, he says, there are a clear set of difficulties to be faced up to.
'There is little growth in Europe, there is volatility in Asia Pacific, there is pressure on margins, the quality of competitors is increasing.
You have got to be more on the ball to succeed. And if your strategy is just to cut costs and tweak productivity, working round the edges, then in the long term you are going to see serious margin erosion because prices in general just don't go up any more. There is huge price pressure, and you have got to deal with that.'
But how? Howard puts down his water and presses his hands together as he explains. 'The opportunity we have is that, through the size and scope of our activities, we can bring something unique to the customer. Not economies of scale, that is just about being a low cost producer. It is about how we take our product to market, about what our customers need from us. If we can fashion ourselves as someone who sells results rather than just products, we are way ahead of the game.
'Partnership,' he continues, 'is the key word. It is a tricky thing. The best way for us to deliver value to our customers is to give them more than simply product, it's to be part of their design and development.' He cites the partnership agreement signed by Vesuvius with British Steel (BS), putting Cookson engineers into BS plants to maximise the most efficient use of its products. 'The customers' initial reaction, of course, is that if it is good for you, it cannot be good for me,' he says, 'so it is a slow learning process. But we have been able to show British Steel, and Ericsson in electronics, that it can be win-win. We say: we will give you this much if we can improve the efficiency for you. It is not rocket science, you know, the notion of partnering has been around for a while - where we have leg-up is that we are in the businesses where you can really do it.'
Howard is a convincing talker - he says he has never been to business school, he just relies on common sense, though he does admit to being a voracious reader of business books. His current favourite, not surprisingly, is Stop Selling, Start Partnering by Larry Wilson, an American business guru who Howard has used to run management retreats for Cookson. Howard's other passion is business ethics, which he promises will be one of his 'platforms' as chief executive. He is clearly a believer in American-style muscular Christianity - he cites 'family values' rather a lot for a conglomerate boss (it can only be a matter of time before he ends up in a Tony Blair think-tank) and I would suspect that beneath the low-key exterior there is a rather tougher core to Howard. He is certainly not afraid to stick his neck out on ethics. He says he regularly takes part in a business leader discussion group at the international community church near where he lives in Weybridge. 'It's predominantly ex-pats, some who are heads of major organisations, all wrestling with the same things. We talk about how to let someone go, how to close a plant, when it is appropriate not to be totally candid with someone, is it ever OK to lie, does there need to be a difference in personal and business values?'
Does there? He raises his eyebrows. 'I am in the process of discovering the answers,' he says slowly, perhaps realising this is something of a hostage to fortune, then adds, 'I don't think you ever really do.' But he obviously has no problems about operating out of Britain, which will be a relief to Cookson shareholders. When he first came over, in 1991, he thought he was just coming for a few weeks. He never left. 'I think it is fairly easy to be an ex-pat here,' he says. His wife and three sons, who attend a nearby international school, have settled in well. He likes the lifestyle, he trains his kids' sports teams at weekends, and regularly commutes into Cookson's City offices by train.
Despite a likely £1 million-plus pay package (his predecessor took home £1.2 million in 1996), he is not going to shut himself away in a chauffeured limousine. 'You know, Andrew,' he says, 'I am a train and underground kinda' guy. That's where I am, it has worked for me so far, so I'm not going to change.'
Doesn't he miss America? No, he says, although he has recently bought his dream house, a summer cottage overlooking the water in Jamestown, Rhode Island. That will be his family's anchor when his children are old enough to decide where they want to make their future. In the meantime, he wants to concentrate on turning Cookson round and - for this, you have to admire him - trying to make working there more enjoyable. 'I'm a great believer in celebrating. Everyone is anxious and I say, why be anxious?
We are a prosperous company, we have had a good November, December is looking great, let's dance and celebrate, let's have fun.'
It is hard not to warm to Howard. Those around him are genuinely excited at the serendipity of his appointment. The right man in the right place at the right time, they say. If the Cookson reorganisation goes smoothly and if the company gets the right chairman (Malpas wants a major British industrialist with chairing experience), they believe only the externalities can trip him up: the crisis in Asia and the resulting global downturn, factors effectively out of his control. And who knows? The crisis in Asia may even present opportunities for the company, which manufactures in the region and may soon have a bag of cash to buy up some devalued rivals.
Anything is possible. It is early days but Cookson shareholders may have finally got the present they want.
Born 25 March, Falmouth, Massachusetts, US
Practising lawyer and partner, Adler, Pollock & Sheehan, Providence, Rhode Island,US
General counsel, Cookson America Inc
Vice president, corporate development, Cookson America
Chief executive, group corporate development, Cookson Group
Chief executive, engineered products and group corporate development, Cookson Group
Chief executive, ceramics and engineered product, director, group corporate development, Cookson Group
Joint managing director, Cookson Group
Chief executive, Cookson Group
WHAT PEOPLE SAY
'Stephen is certainly not going to be as flamboyant as Dick Oster, and I suspect he will be more guarded in his statements. Dick was an entrepreneur. Stephen is more like a highly effective corporate executive.'
Robert Malpas, chairman, Cookson
'Now Cookson is no longer a recovery stock you need a different type of manager. I would think that Howard is the right man for Cookson now.' Ian Rennardson, analyst, Merrill Lynch
'He is certainly low-key, he doesn't do things with a great deal of hoopla,
but his output is prodigious and he is courageous. He does the tough things that need to be done.' Marcus Agius, vice-chairman, Lazard Bros & Co
'He is very straight in the best sense, very good at the details, he will also see the big picture, and he is a nice guy to deal with. In fact, I have never met an enemy of his, which is extraordinary in this business.' Christopher Clark, chief operating officer of Johnson Matthey and chairman of Cookson Matthey Ceramics
'Dick (Oster) was a one-off. Steve will do it his way and I think shareholders will find that very reassuring.'
John McGrath, group chief executive, Diageo and non-executive director of Cookson.