Rolls-Royce

Ownership

Rolls-Royce grew from the engineering business of Henry Royce, which was established in 1884 and ten years later began to manufacture dynamos and electric cranes. Charles Rolls established a separate business with Royce in 1904 because Royce had developed a range of cars which Rolls wanted to sell. A corporate owner was incorporated in 1906 with the name Rolls-Royce Limited.

In 1971 the same company, Rolls-Royce Limited, entered voluntary liquidation because it was unable to meet its financial obligations. It remains in existence today, still in liquidation. Its business and assets were bought by the government using a company created for the purpose named Rolls-Royce (1971) Limited. Rolls-Royce Motors was separated out in 1973. Rolls-Royce (1971) Limited currently carries on the business under the name Rolls-Royce plc.

Rolls-Royce plc returned to the stock market in 1987 under the government of Margaret Thatcher. In 2003 ownership of Rolls-Royce plc was passed to Rolls-Royce Group plc. In the same way, Rolls-Royce Group plc passed ownership on 23 May 2011 to Rolls-Royce Holdings plc. Throughout these corporate changes Rolls-Royce plc has remained the principal trading company.

Growth

The 1980s saw the introduction of a policy to offer an engine fitment on a much wider range of civil aircraft types, with the company's engines now powering 17 different airliners (and their variants) compared to General Electric's 14 and Pratt & Whitney's 10.

The civil engines business represents the company's main area of growth. Between 2010 and 2018, Rolls-Royce invested £11 billion in facilities and R&D and launched six new civil engines including the Trent XWB and the Pearl 15 for the business aviation market. It secured orders for 2,700 engines for wide-body aircraft and business jets. It expects to produce over 600 wide-body engines a year and should power over half of the world's wide-body fleet within a few years, up from 22% a decade before.

In 2023, Rolls-Royce entered into an agreement for $3.52 million of funding with the UK Space Agency for the creation of a nuclear reactor on the moon. The project is intended to provide power for space missions.

Restructuring

In 2014 and 2015, Rolls-Royce issued at least four profit warnings due to US defence cuts, a downturn in the offshore oil and gas market and its civil aerospace business, the company initiated job cuts of over 3,000 in response. Rolls-Royce had been selling many of its aero-engines in combination with long-term service contracts. Even though the company booked profits in part with the delivery of the engine, actual payments only came in over time. Between 2003 and 2015, it sold a majority of its engines with these “TotalCare” contracts. The company announced it would no longer be able to move its revenues forward from its long-term service contracts to compensate for its contracts being unprofitable in the early stages after the introduction of IFRS 15 in 2018 and its profits for 2015 would have been £900m lower than the £1.4bn it reported if it had followed the new accounting standard.

In February 2017, Rolls-Royce posted its largest ever pre-tax loss of £4.6 billion; This included a £4.4 billion writedown on financial hedges that the company uses to protect itself against currency fluctuations, and a £671 million penalty to settle bribery and corruption charges with the Serious Fraud Office (SFO), the US Department of Justice, and Brazilian authorities.

Facilities

Testing

Rolls-Royce's £90 million Testbed 80 in Derby is the largest of its kind, sized for engines of up to 140,000 lbf (620 kN) of thrust. Design started in 2017, construction began in 2018 and it was officially opened in 2021. The 80,730 sq ft (7,500 m2) facility is 426.5 ft (130.0 m) long, has a 95 ft (29 m) tall intake tower and a 123 ft (37 m) tall exhaust stack. Built from 3,450 tons of steel and 27,000 m3 (950,000 cu ft) of concrete, it has a 49 by 49 ft (15 by 15 m) tall and wide enclosed space and it can handle a 66 tons engine including its carrier. The company completed its first engine run on the new test bed in July 2024.

X-ray imaging allows to visualize the position of seals and clearances in real time while an engine is running. While it was retrofitted on Rolls' test bed 57, test bed 80 is the first to be purpose-designed for industrial radiography. To protect from external X-ray, 30 cm (11.8 in.) of lead, double walls are up to 8.9 ft. (2.7 m) thick (a 5.6-ft. interior wall and 3.3-ft. exterior wall) and provide acoustic insulation. Canadian prime contractor MDS Aero Support is responsible for design and management, test systems supply, engine adapters, support systems and data acquisition and control while construction is done by Buckingham Group Contracting.

Energy gas turbine and compressor business

In May 2014, Rolls-Royce sold its energy gas turbine and compressor business to Siemens for £785 million.

Commercial marine business

In July 2018, Rolls-Royce sold its commercial marine business to Kongsberg for £500 million.

Northern Engineering Industries / broken up and sold

In 1988, Rolls-Royce acquired Northern Engineering Industries (NEI), based in the North East of England, a group of heavy engineering companies mainly associated with electrical generation and power management. The group included Clarke Chapman (cranes), Reyrolle (now part of Siemens) and Parsons (now part of Siemens steam turbines). The company was renamed Rolls-Royce Industrial Power Group. It was sold off piecemeal over the next decade as the company re-focused on its core aero-engine operations following the recession of the early 1990s.

Allison Engine Company

On 21 November 1994, Rolls-Royce announced it had agreed terms to acquire the Allison Engine Company, an American manufacturer of gas turbines and components for aviation, industrial and marine engines. The two companies had a technical association dating back to the Second World War. Rolls-Royce had previously tried to buy the company when General Motors sold it in 1993, but GM opted for a management buyout instead for $370 million. Owing to Allison's involvement in classified and export restricted technology, the 1994 acquisition was subject to investigation to determine the national security implications. On 27 March 1995, the US Department of Defense announced that the "deal between Allison Engine Co. and Rolls-Royce does not endanger national security." Rolls-Royce was, however, obliged to set up a proxy board to manage Allison and had also to set up a separate company, Allison Advanced Development Company, Inc., to manage classified programmes "that involve leading-edge technologies" such as the Joint Strike Fighter programme. In 2000, this restriction was replaced by a more flexible Special Security Arrangement. In 2001, Rolls-Royce and its LiftSystem was among the group that won the JSF contract for the F-35.

Settlement with SFO

In January 2017 Rolls-Royce came to an agreement with the SFO to pay £671 million under a deferred prosecution agreement to avoid prosecution for bribery to obtain export contracts. As part of this agreement, a $170 million fine was paid to US authorities to end a bribery investigation, and $25 million to the Brazilian authorities.

Subsequent to the settlement, Private Eye reported that some of Rolls-Royce's contracts under the scope of the SFO investigation had been supported by the British government's UK Export Finance department, using taxpayers' money. The government department underwrote multimillion-pound liabilities under Rolls-Royce contracts secured with the help of bribes and "facilitation" commissions. It has also been highlighted in the press that Rolls-Royce's auditor since 1995, KPMG, had failed to identify any corrupt practices throughout the 1990s and 2000s. This is notable considering judge Brian Leveson's statement that Rolls-Royce's offending was "multi-jurisdictional, numerous", "persistent and spanned from 1989 until 2013", and it "involved substantial funds being made available to fund bribe payments".