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ROLLS-ROYCE

ROLLS-ROYCE – BON VOYAGE TO A BRILLIANT CEO
By Howard Wheeldon, Senior Strategist at BGC Partners

31 Mar 11. Loyalty being in somewhat short supply these days it may be said that to have spent twenty-seven years with one company and no less than fifteen of those as CEO is a rare achievement. Sadly all good things come to an end and today marks the final day of the long and eventful career of Sir John Rose at Rolls-Royce. I wish Sir John well for whatever the future holds and given that we both share the view that more objective emphasis needs to be placed on engineering and manufacturing skills within our schools and universities I may hope that our paths will cross again very soon. In the meantime I allow myself the pleasure today of recalling just a few ups and down of the very long period that Sir John has been part of Rolls-Royce and that by good fortune I myself have been able to witness through near four decades of following this very fine UK based company. I suppose that for me the bottom line is that Rolls-Royce ended last year in what might be described as probably the strongest financial position in its very long history and that much of this is due to Sir John Rose.

First a brief resume of key facts that mark the culmination of fifteen years achievement of Sir John Rose as CEO of Rolls-Royce:

1995 2010

Order Book £7.6bn £59.2bn
Revenues £3.6bn £10.9bn
Pre Tax Profit £175m £955m

Dividend per share 5p 16p
Share Price 146p 619p

Turnover per head £83,000 £280,000
Output per head £22,727 £56,000

UK Manufacturing/
GDP % 21% 11%
Workforce 16% 9.5%

Total No RR of Civil
Engines Installed 5,740 13,790
Of which Trent: 22 2,000 (+2,500 on order)

A Very Short History Since 1984!
If I remember correctly I had first met Sir John Rose early in 1989 following his appointment as Director of Corporate Development. Having joined Rolls-Royce in 1984 suffice to say that by the time we first met few were under any illusion that John Rose was on his way to the top. In my commentary piece today I am looking only at the post 1984 period but for those interested in the full history of this exceptional company may I recommend the three volumes of Rolls-Royce history written by Peter Pugh under the title ‘The Magic of a Name’ published a few years ago.

Having been privatised in 1987 under the wry leadership of Chairman, Lord (Francis) Tombs as CEO, Sir Ralph Robins it was from this point that management began the long and sometimes ongoing struggle to convince multitudes of doubting analysts, institutional investors and press that to survive and prosper Rolls-Royce would need to continue investing large sums in both product and research and development. Although this had been first attempted back in the 1970’s the company made increasing use of RRSP’s (Risk Revenue Sharing Partnerships) through the late 1980’s and 1990’s in an attempt to reduce or should I better say spread future cost and risk profile. RRSP’s worked well for the company as they also did for those that chose to invest in the various developments. The trouble for the investment community was that these instruments were often misunderstood and misinterpreted meaning that they failed to find that much favour in the city.

Following Tombs retirement in 1992 the highly respected Sir Ralph Robins who had joined the company as a graduate engineering apprentice back in 1955 moved from the CEO r

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