John Rishton, the chief executive of engine maker Rolls-Royce, could teach some of his FTSE-100 peers a thing or two about clarity.
He says his priorities are first, to deliver on the promises he has made, second, to decide where to grow and where not to, and third, to improve financial performance.
What a refreshing contrast with Antony Jenkins at Barclays, to take a random example, whose Project Transform and chatter about building a ‘go to’ bank just make the heart sink.
Delivering on promises: The XWB being prepared for testing in Derby by Rolls-Royce, which has been rewarded for its solid long-termist approach with a rise in the share price of 112 per cent in the last three yearsStraightforward language matters for companies, particularly when they are trying to restore trust because fashionable, meaningless jargon suggests a hollow approach.
The succession to Sir Simon Robertson as chairman of the Derby-based engineer has also been handled calmly, in stark contrast to the speculation over the tenure of Dick Olver at rival BAE Systems.
Power passes to Ian Davis, who as a non-executive at BP at the time of the Deepwater disaster and a former chairman of McKinsey has plenty of experience at managing crises, should it be needed. It might be, given the Serious Fraud Office is looking at allegations of bribery and corruption in China and Indonesia.
More... RUTH SUNDERLAND: BAE could thrive with a bit of British intelligence RUTH SUNDERLAND: Hester is bullish - but there is no direct line to recovery for RBSUnder the heading of ‘business as usual,’ Rishton believes the civil aerospace market will continue to grow strongly thanks to demand for planes from emerging economies including China and for more energy efficient engines.
Defence, despite the well-known problems in the US where the military budget faces sequestration next month, is expected to continue to account for around 20 per cent of Rolls’ business over the longer term, there being no sign of an imminent outbreak of world peace.
Rolls is investing heavily in research and innovation and is hiring 300 graduates and apprentices, with hopes to take on more next year. Its solid long-termist approach has been rewarded with a rise in the share price of 112 per cent in the last three years, despite the slump. There was no update on the SFO’s inquiries or on the ethics review being led by Lord Gold.
Although the affair plainly did not dent the results, it should not be minimised.
Behaviour of the sort alleged to have gone on at Rolls was commonplace in the defence industry in the past. Companies now are being judged by the more exacting standards of the present day, which arguably is unfair.
They may also find themselves in no-win situations where they risk losing business by being whiter-than-white, yet face horrible damage to their reputation and heavy penalties if caught.
Still, there can be no excuse if there has been wrong-doing, particularly from a company like Rolls that is so vital for Britain’s hopes for manufacturing recovery.
Heinz means dealz
Warren Buffett’s $28billion offer for Heinz beans and tomato ketchup has galvanised markets.
Buffett is sitting on a huge $48billion cash pile that he needs to invest on behalf of his Berkshire Hathaway investors, and Heinz is exactly the kind of business he loves: big global brand, straightforward product, nice cash flow.
Buffett is not infallible – he had a stake in JJB, which went under – but he is not known as the Sage of Omaha for nothing.
The wider worry, however, is that cheap money and unfounded exuberance creating a fresh deal bubble.
Tens of billions of dollars worth of mergers and takeovers have been announced in the US in a matter of mere days: AMR’s merger with US Airways; Comcast’s move to grab full control of NBCUniversal and Michael Dell’s move to take private the Dell computer empire he founded back in the day.
In the UK, we have US tycoon John Malone’s offer for Virgin Media, a possible private equity bid for EE (the mobile company formerly known as Everything Everywhere) and Vodafone eyeing a £5billion takeover of Kabel Deutschland.
But there were a couple of spectres at the feast yesterday to give today’s dealmakers pause for thought.
Tom Albanese was a phantom presence at Rio Tinto’s results, having been unseated from the mining group because of write- offs resulting from the hubrisistic purchase of Alcan.
Then there was Eric Daniels, the former boss of Lloyds, who tried, unconvincingly, to argue to the Banking Commission that the rescue takeover of HBOS was not a totally terrible idea.
The outbreak of deal-mania has brought some zing back to the City and Wall Street, where everyone loves a deal, because corporate activity makes them richer.
For the rest of us, it’s debatable: mergers and takeovers don’t necessarily deliver benefits to the wider society or even create value for shareholders; the academic work suggests most destroy it.
The frothy mood on share markets is out of kilter with economic reality – and we all know what can happen when the mood turns dark.