GEC shares under the prudent stewardship of Lord Weinstock were a nice little earner for me.
In 1996 Lord Weinstock retired and handed over the reins to George Simson and John Mayo. They were new brooms and decided on a new strategy for GEC. This is not unheard of, indeed when Peter Hadsley-Chaplin took over from his father at MP Evans he pivoted the company away from Malaysia into Indonesia: a successful plan.
Simpson and Mayo re-invented GEC by buying two telecoms companies in America and changing the name to Marconi. The City had long looked greedily at the cash reserve accumulated by Weinstock and was delighted. The share price surged and unfortunately I stayed in for the ride. The dotcom bubble burst and Marconi shares became valueless. I hope I learnt a lesson.
When Warren East stepped in as chief executive of Rolls-Royce he found a company in a mess. There were bribery charges to be dealt with, too much management overheads and some loss-making divisions. He took tough decisions and, job done, stepped down at the end of last year. The first fruits of his work have been seen this year. East’s background is in engineering and he is not well-versed in smarming up to the money men in the City. His successor, Tufan Erginbilgic, is a former BP man with the ear of the City. I hoped he would pay tribute to his predecessor’s achievements and plan to build on Warren’s restructuring. I was wrong. He greeted the turnaround results, for which he can take no credit, with this blistering attack.
“The new chief executive of Rolls-Royce has told staff that the engineering company is a “burning platform” that must transform to survive.
Tufan Erginbilgic, the former BP executive who replaced Warren East as chief executive at the start of January, said the coronavirus pandemic could not be blamed for what in reality was a perennial underperformance of the business compared with rivals. ‘We underperform every key competitor out there,’ Erginbilgic said in an address at Rolls-Royce’s UK manufacturing site at Derby, which was broadcast to staff globally. ‘Every investment we make, we destroy value.’
He is expected to announce a sweeping and painful restructuring plan for the FTSE 100 company. Its market value has slumped by two-thirds over the last five years. ‘We do have a burning platform,’ he said, evoking the analogy the former Nokia chief executive Stephen Elop made in 2011 when he told his staff they faced the same stark choice as a worker on an oil platform in the North Sea whose rig was aflame and who had to jump into freezing water to survive.” (The Guardian)
If Rolls-Royce is a burning platform Erginbilgic is fanning the flames with his hot air. The City likes it and the share price has surged. Because of a generously priced Rights Issue during Covid my purchase price is 62p. Today the shares go for £2.32 and I am going to sell. I don’t trust the rhetoric and I don’t want to feed the fishes in the North Sea.
I am not too beholden obsequiously to the City men
& like to think independently ,& cautiously . I learn a lot at AGMs & ask critical questions at them & by e-mail . I think that approach has done me more good than harm .
The investment managers at AGMs look at their stock picks through rose-tinted prisms.