East steps down
Rolls-Royce CEO exits after turbulent turnaround
Warren East, chief executive of aero-engine maker Rolls-Royce, will step down at the end of 2022.
His decision comes after a turbulent period for the company and slowly guiding the company back into the black.
Today it posted a £124m annual statutory profit against a £3.1 billion loss last time. Underlying operating profit came in at £414m, from a prior year loss of £2bn. In a volatile market, shares were down 18.74p (15.92%) to 99p in mid-morning trade.
Mr East will leave after nine years on the board and almost eight years as CEO and the board will now launch a search for his successor.
There will be two further departures from the board this year. Lee Hsien Yang will have completed his nine-year term of office at the end of 2022. In addition, Irene Dorner has indicated her intention to step down and will not be standing for re-election at the AGM. Jitesh Gadhia, a non-executive director at Taylor Wimpey will join the Board on 1 April and will chair the remuneration committee.
Sir Kevin Smith currently senior independent director and chairman of the science & technology committee, is stepping down. George Culmer will be appointed senior independent sirector and Paul Adams will be appointed chairman of the science & technology committee.
The latest figures include significant cost savings from the restructuring programme, primarily in Civil Aerospace, continued resilient performance in Defence and strong growth in Power Systems as it benefitted from recovering end markets.
The prior year comparative underlying loss of £(2.0)bn included £(1.3)bn of one-off charges mostly related to the impact of COVID-19 on Civil Aerospace.
The company said: “We are well positioned for the anticipated growth in our end markets as the impact of the COVID-19 pandemic eases.
“This, along with continued good contribution from defence, gives us confidence that we will see positive momentum in our financial performance in 2022 despite the challenges and risks around the pace of market recovery, global supply chain disruption and rising inflation.
“We expect low-to-mid-single digit revenue growth and we expect our operating profit margin to be broadly unchanged as underlying operational improvement is balanced with increased engineering spend to develop sustainable growth opportunities.
“We expect to generate modestly positive free cash flow in 2022, seasonally weighted towards the second half of the year.”
Russ Mould, investment director at AJ Bell, said: “Even though markets were already in a bad mood because of war in Ukraine, shares in Rolls-Royce fell by even greater magnitude as investors reacted really badly to the resignation of CEO Warren East.
“East has been at the helm of Rolls-Royce for a comparatively long time and while progress may have been slower than the market may have liked, the credentials he built up at former market star ARM meant he was given the benefit of the doubt in a slow rehabilitation of the business.
“Rolls-Royce was in a very tricky spot when he took over, with a string of damaging profit warnings in the early 2010s and a serious cash flow problem.
“It has been pretty turbulent under East too, though in part that reflects a global pandemic which had a disastrous impact on Rolls-Royce’s aviation sector clients.
“It doesn’t help that today’s results offer a less than winning legacy. The company has missed on earnings and margin guidance for 2022 is dismal looking.
“Rolls desperately needs more planes in the air as its lucrative spares and repairs revenue from an installed base of engines is heavily dependent on flying hours.
“Longer term shareholders will hope East, who has overseen a very significant overhaul of the business, has at least laid the foundations for a more meaningful recovery as air travel recovers to pre-Covid levels.”