Turbo Tufan’s flying start
HE is known simply as Turbo Tufan in the City. You can see why. Since Tufan Erginbilgic took over as chief executive of Rolls-Royce at the start of the year, shares in the aerospace-to-defence giant have trebled and are now above pre-pandemic levels.
The shares were on the move again yesterday after the latest comments from Turbo Tufan that he is confident about winning the competition being held by the Government to build small nuclear reactors.
Known as SMRs, these reactors are considered the holy grail for future energy supplies because they can be built in factories and then assembled where they are needed, cutting down on traditional nuclear’s huge costs.
On the face of it, Erginbilgic’s confidence is well-placed.
Rolls-Royce is the only engineer among the six bidders that has the SMR technology in a european regulatory approval process, putting it almost two years ahead of its competitors. The design is based on minireactors which it has been making for Royal Navy submarines for years.
Rolls-Royce is also the only British firm among the six short-listed bidders to have submitted designs to Great British Nuclear – the Government body making the decision. You might conclude, therefore, that Rolls-Royce is a slam dunk to win when the award is announced next spring.
Unfortunately, the competition is not that straightforward. Because of rules around such contracts – including EU retained law – the Government has to hold an open house to overseas contractors such as Westinghouse, Ge Hitachi, NuScale, Holtec and France’s EDF.
Yet as Turbo Tufan also told analysts at last week’s capital markets day, if Rolls-Royce doesn’t get the contract: ‘It will be hard to explain to anybody, to myself as well.’ More than hard – it would be a downright disgrace.
Unless Rolls-Royce’s bid is truly sub-optimum, any decision other than granting the contract to the Derby-based manufacturer would be perverse at a time when the country needs more than ever to bolster its industrial base, adding new skills and jobs. And energy security.
Erginbilgic has engineered the most remarkable turnaround across Rolls-Royce. The balance sheet has been scraped clean, taking the strain off interest payments on loans which last year took up around half of its operating income. The strategy now is to free up to £3bn in free cash flow, sell-off the flying taxi and electric plane businesses and cut costs to boost profits.
On the growth side, Rolls-Royce is getting back to making smaller ‘narrowbody’ passenger jets for short-haul flights. Air travel is still below pre-lockdown levels with engine flying hours down about 14 per cent. So any upturn boosts servicing revenue which goes straight through to profits.
Turbo Tufan has more than earned his nickname. If this first year is anything to go by, it is worth betting he can keep the shares on a roll.
Haldane’s Treasury splits
THE latest idea from the Bank of england’s former chief economist, Andy Haldane, is for the Treasury to do the splits.
He advises the Chancellor to break it into two – one part focused on finance, and the other on the economy.
The latter should be based somewhere like Darlington, and have its own minister. With the PM, the two chiefs should lead on economic policy and, like in the US, be supported by a council of advisers to improve growth.
Whacky or sensible? The Treasury undoubtedly needs a shake-out. It’s fair to point out that most of the pointy-heads who work there have never worked in the real world. even fewer have run a business.
They don’t understand what is meant by animal spirits or what it’s like being a boss having enough cash flow to pay workers at the end of the month.
So having more productive souls – and not only economists – working at the apex of government could be positive. Like many of Haldane’s ideas, this one has legs and should certainly be discussed further.
Let’s see what Rachel Reeves has to say.
Gold on the run
GOLD is flying high again after last week’s record prices, reaching $2,111 per ounce.
It is rising on the back of a weaker dollar and the growing consensus that interest rates will be cut early next year.
It is an old saying but one worth repeating. He who has the gold makes the rules.
CITY & FINANCE
dmg media (UK)