London - Rolls-Royce Holdings PLC named board member Warren East as chief executive officer to succeed John Rishton, who had come under pressure in the wake of several profit misses and investor discontent with his strategy at the world’s second-biggest aero-engine maker.
East, the CEO of chipmaker ARM Holdings PLC from 2001 to 2013, was hired after “an extensive international search”, London-based Rolls-Royce said in a statement today. Rishton, 57, decided to retire, the company said.
Rolls-Royce announced plans last year to eliminate about 2 600 jobs and named a new finance chief as it grappled with its first sales drop in a decade. Rolls-Royce forecast last month that profit may fall again this year as a slowing economy prompts clients to delay orders and sanctions over the Ukraine crisis stall Russian deals.
East, 53, has a “deep understanding of technology and of developing long-term partnerships”, Rolls-Royce Chairman Ian Davis said in the statement. “He has proven strategic and leadership skills in a global business and a strong record of value creation.”
Shake-up
The appointment may increase speculation about the future of the company, said Nick Cunningham, managing partner at Agency Partners in London. Rishton’s tenure was “relatively short” and he “appeared to be doing a good job in difficult circumstances”, he said.
Rolls-Royce rose as much as 45 pence, or 4.5 percent, to 1,052 pence in London. The stock has gained 21 percent this year, after losing 32 percent in 2014, its worst annual return since 2008.
In a letter earlier this year, Rolls Royce shareholder Sequoia Fund called for a management shake-up, describing the the UK manufacturer’s board as “stubborn and entrenched”. Rolls-Royce was destroying value by expanding its marine-engine and power-generation business even as those operations face increasing competition from low-cost Asian producers, the fund’s managers said.
Engine focus
The Sequoia report followed comments made by analysts at Investec Ltd last year, which suggested that Rolls could raise its valuation by about a fifth if it split the aerospace business from the land and sea assets as two listed companies. Another option would be to sell non-aerospace assets, which could result in a cash return of about 6 billion pounds ($9 billion), or 330 pence a share, they said.
The UK company is suffering in spite of high delivery rates of the world’s two biggest aircraft manufacturers, Boeing and Airbus Group NV. Since taking charge in 2011, Rishton has sought to reshape Rolls-Royce’s operations, including the sale of its gas turbines and compressor business to Siemens AG.
“We have made good progress transforming Rolls-Royce and have a strong team in place,” Rishton said, adding that after 14 years as CFO and CEO he has “decided it is time for a change in lifestyle.”
Under East, an engineer by training, ARM has grown to become a leader in semi-conductor development, Rolls-Royce said in the statement. The executive has a “record of innovation and a strong commitment to research and development”.
* With assistance from Phil Serafino in Paris, Benjamin Katz in London and Andrea Rothman in Toulouse
Bloomberg