A decade at full throttle for UK icon
Feb 15, 2013 (Daily Mail - McClatchy-Tribune Information Services via COMTEX) --
WHEN BP director Ian Davis takes over the chairmanship of Rolls-Royce later this year he will settle into one of the most coveted boardroom posts in British industry.
The former chairman of management consultancy McKinsey & Co will be stepping into a company that has been forced to rapidly respond to allegations of bribery and corruption in foreign deals.
But he is well versed in crisis management, having arrived at BP just days before the oil giant's Gulf of Mexico oil spill that threatened to bring the company to its knees.
A 30-year McKinsey veteran, Davis will on May 2 replace Sir Simon Robertson, who is retiring after eight years in the Rolls-Royce chair. Robertson said he was "pleased to know I shall be succeeded by a man of his stature and international experience."
The appointment comes at a sensitive time for Rolls-Royce, which has just passed information to the Serious Fraud Office about allegations involving its intermediaries in overseas markets following allegations of malpractice in Indonesia and China.
The company -- which has sites in Derby and Bristol and employs 45,000 people worldwide, half of which are in the UK -- yesterday said it had significantly strengthened its compliance procedures in recent years.
Chief executive John Rishton said that a review of current practices being led by Lord Gold would report to the board's ethics committee. He declined to give more details, adding: "He has lots of experience in this area and is going to review our compliance rules and regulations. We want to make sure that we are the best in class."
Rishton's comments accompanied a strong set of annual results which featured an increase in underlying profits for the tenth consecutive year, rising 24pc to pounds sterling 1.4bn at the pre-tax level. The company said it expected "good growth" in profits and "modest" revenue growth this year.
Margins also improved thanks to higher volumes, a different sales mix and cost controls along with the sale of its stake in engine-maker IAE.
Revenues rose 8pc to pounds sterling 12.2bn during 2012, while Rolls-Royce said it now had a book of outstanding orders worth pounds sterling 60.1bn -- 4pc higher than a year earlier. New business came from pounds sterling 10.3bn of civil aerospace orders, pounds sterling 1.6bn of defence aerospace and pounds sterling 3.3bn of marine engines.
The news boosted shares by 32.5p to 1017p as the company said it was paying an annual dividend of 19.5p -- 11pc higher than for 2011.
Looking ahead, Rishton said civil aviation would continue to perform strongly as a raft of new wide-bodied aircraft were delivered in increasing numbers, including the Airbus A380 and A350 and Boeing's 787 Dreamliner. He said that recent problems with the Dreamliner which have seen the aircraft grounded would soon pass and that Rolls-Royce was unaffected by the teething problems.
"Boeing will get the aircraft back in the air. They are still producing 787s and we are continuing to make the engines," he said. "No one can remember the trouble with the 747 when it was first launched."
On defence aerospace, which accounts for 20pc of Rolls-Royce's revenues, Rishton said the company continued to surprise the market with its success as defence budgets come under increasing pressure.
"Defence spending is increasing over time as countries want to ensure protection from whatever threats they foresee and they have a propensity to go to war from time to time," he said.
Rolls-Royce is making engines for the short take off and vertical landing version of the F35B Lightning II Joint Strike Fighter, which has just gone into service with the US Marine Corps. Deliveries are also being made to the UK.
Rishton said: "The priorities for the business remain the same as last year: deliver on the promises we have made; decide where to grow and where not to; improve financial performance."
Rolls-Royce is working to improve its operational performance and reducing costs, including modernising its IT system, but it is also pumping cash into research and development as well as exploring opportunities in emerging markets.
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