ALEX BRUMMER: Rolls-Royce boss John Rishton hits the ejector seat
Not so long ago it was fashionable for the top brass at Rolls-Royce to complain that it could not recruit sufficient engineers in Britain because the best and brightest were being attracted to the City by fancy salaries.
Now Britain’s premier engineering firm is to jettison 2,600 jobs, many of them in engineering, as the group seeks to bring its costs back under control and responds to the challenges from GE in the US, the slump in the eurozone and the slowdown in emerging markets.
By far the most important job of all to go, as Rolls seeks to get back in the good books of investors after an embarrassing profits warning last month, is that of the long-serving chief financial officer Mark Morris after 27 years at the company.
Engine room: Rolls Royce's sparkling growth has stalled and that means job cuts
The statement describing his departure as with ‘immediate effect’ and damning him with the faint praise of ‘hard work over many years’ leaves little doubt that he has been shown the door.
Conveniently his replacement is to hand, in the shape of David Smith, who currently looks after the finances of the aerospace division, and is a former chief executive of Jaguar Land Rover, one of the UK’s great industrial success stories of recent times.
Smith, it is promised, will bring strong financial analysis to the job, something that investors will crave after missed profits forecasts.
It is not the first time in its history that Rolls-Royce, which spent time in government ownership in the 1970s after failing to get the sums right on the RB211 engine (the prototype for the modern Trent), has had to face up to complex accounting issues.
Companies with big R&D expenditures and long development times for new projects require first class financial as well as engineering skills.
Hopefully, chief executive John Rishton has addressed the lacuna in good time.
But it will be some while before the shares, trading at 848p, return to the dizzy heights of a shade under £13 seen in the last 52 weeks.
Popular: Primark’s little pink coat, selling for £25, has been flying off the racks
In the pink at Primark
The obsession with low prices, in an era of flattened pay, and fears of deflation, is not confined to food as seen in the success of Aldi, Lidl and Asda. It is also the critical factor in fashion for the young.
The astonishing success of Primark in France, home of haute couture and elegance, could hardly have been predicted. Indeed, it has even taken chief executive George Weston by surprise. He only wishes the company had planned for more than five stores in the country.
Primark sales look unstoppable, climbing to £4.95billion in the year to September 13, up 16 per cent, and driving a sharp increase in profits. Both overall sales, boosted by new selling space, and same-store sales are spurting. Other High Street fashion chains complain that an exceptionally warm autumn has hurt sales.
However, Primark’s little pink coat, selling for £25, has been flying off the racks.
After its success in Europe the next front for Weston and Primark is the United States with the former Filene’s basement store in Boston the first of ten earmarked for opening across the north-east with half-a-million square feet of floor space, as well as warehousing.
Primark is leasing rather than buying and is capping the experiment at £200million of capital expenditure, giving some assurance to investors that it is not on a Tesco-style cash-gobbling experiment.
As for the supply chain, Primark continues to take seriously its responsibilities in Bangladesh after the Rana Plaza disaster.
It is even taking the trouble to advise recipients of compensation how to use the money sensibly, so that it has a lasting impact.
The commitment to Bangladesh production remains strong despite the ongoing costs of better construction, fire safety and the like.
Not all is well at parent Associated British Foods. Its expansion in the beet sugar market has been an unmitigated disaster until now with operating profits plummeting 56 per cent.
Weston has been hacking away at cost and there is hope when the EU regime changes in 2017 ABF will be well placed to be the region’s biggest and lowest cost producer.
Elsewhere on the food front, ABF has shown its mettle in turning Twinings into the second largest tea brand in Britain and the fastest growing in the US and Australia.
One of the advantages of a dominant family shareholding is that the Westons can afford to maintain a ‘conglomerate’ model, invest for the longer term and ride out the commodity cycle without noisy intervention from the outside shareholders.
Virgin sell-off
Sir Richard Branson has been quick to raise new funds following the tragic accident involving the Virgin Galactic space craft. On Monday he announced that he would float the US airline Virgin America in which he holds a 25 per cent stake.
Having cancelled the float of Virgin Money just two weeks ago it miraculously has been revived despite the parlous state of the eurozone.
Desperate or what?
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