ROLLS ROYCE – “FOR WHOM THE BELL MAY TOLL!”
HAS WARRREN EAST COLLECTED A ‘HOSPITAL PASS?’
For nearly 50 years Rolls Royce, the most quintessential British brand imaginable has been courting disaster or rising to superlative heights on various occasions.
In 1971, due to insurmountable difficulties with the ‘RB211’ engine, Rolls Royce had to be taken in to public ownership, with the car division being sold off in 1973. The main engine operation was returned to private ownership towards the end of the Thatcher era in 1987.
Rolls Royce increased and multiplied all the way through the eighties and nineties and latterly under the stewardship of Sir John Rose from 1996 until 2011, this company’s order book remained fairly competitive. John Rishden, fresh with new ideas after a successful sojourn at Royal Ahold, took over the reins from Rose.
Perhaps life under Sir John Rose was too comfortable. By March 2014, due to operational shortcomings, Rishden posted a profits warning. It was followed by another in June 2015. Having enjoyed spending the spring in his garden, having retired after a hugely success time as CEO of ARM Holdings, he took over control of this bastion of British industry. The ink on East’s contract was hardly dry before he posted another profits warning in July 2015.
Today’s very grim outlook for 2016, which may see a 50% reduction in profits in 2016, could be ‘the straw that broke the camel’s back.’ The shares fell 24%, before settling down 19.2% at 538.5p at 4.00pm. These shares stood at 1054p on 27th April 2015.
We are hearing alarm bells in our ears round here at Panmure. Can this company recover from its current state? Does it need a rights issue or are we past that point? Is government intervention required to save the workforce in Derbyshire? Should the PM and BIS Secretary Sajid Javid start to consider outside investment from say China or India, using our skills to make these engines but utilising and selling to overseas markets. We feel the ‘Bell is tolling’ as Ernest Hemingway would have written. A Tory government could not countenance the idea of a brand like Rolls Royce to suffer seriously human ‘slings and arrow of outrageous fortune.’ The idea of a global defence company, with a highly skilled workforce and a brilliant brand, falling amongst thieves is unthinkable. Rolls Royce may be in disastrous disarray. HM Government, this may be no idle threat!
For comment call Panmure Gordon’s senior analyst on the sector – SANJAY JHA – 020 7886 2805 – Sanjay.firstname.lastname@example.org