Rolls-Royce is now looking for a chief executive replacement to Warren East, as the engineering company rebuilds following the Covid crisis.
Anita Frew, Chairman of the Board has started to create a succession plan for East. East has been the most prominent name in British engineering ever since 2015.
East hasn’t announced his plans for stepping down, but it is possible that he will leave the company as early as next year. ‘Analysts think he could leave the FTSE 100 after it has completed the three-pronged recovery plan he promised investors.
Ending: Since 2015, Boss Warren East is the British engineer with the best reputation
Insiders in the industry claim that Rolls looked closely at the heads of FTSE listed defence companies to see if they were interested in becoming his successors. Rolls is believed to have used MWM Consulting, a recruitment firm, to create the lists.
Prior to the pandemic the Derby-based engineer made around half of its revenue servicing large plane engines.
The airline’s hourly rate of flight was a big part of its revenues. As a result, it suffered a loss in revenue when planes stopped flying for several months due to the pandemic.
The company suffered dizzying losses. Major credit agencies reduced its credit score to junk and the bank quickly ran out of cash.
Defence accounts for around three quarters of the company’s total revenue. It is also less dependent on the work it does on large plane engines or its “civil aerospace” division.
According to one source, it is a “different business now” and that the chief executive must reflect this.
According to company rules, at least one chairman and chief executive must come from Britain.
Anita Frew searches for Warren East’s successor
Frew, a UK citizen, means that the next boss might be an international one.
East spent over a decade at the helm of Arm Holdings in Cambridge, an organization that was based on technology and is currently being sold to Nvidia.
He started a restructuring when he arrived to reduce the number of middle managers and bloated offices to lower costs.
Covid’s arrival forced Rolls to launch its third major shakeup in six years. Rolls began a comprehensive overhaul in order to address the crisis. It included the elimination of 9,000 employees from the 52,000 strong workforce and raising capital.
It has raised £7.5billion since the pandemic began, including a £2billion share sale.
East promised investors his strategy would stop the company burning through cash, which it achieved last year, to sell divisions of the group worth £2billion and slash its costs by £1.3billion. Rolls has sold the Spanish aeronautical unit ITP Aero (to Bain Capital) and is now on track for reaching the disposals goal.
In a recent trading update Rolls said it was likely to hit the £1.3billion cost savings goal by the end of this year. Rolls has made significant progress in a long-running effort to construct small modular reactors, which are mini nuclear power stations.
The SMR project has been separated into a standalone company called Rolls-Royce SMR last year, in which Rolls has an 80 per cent holding. Rolls spokesmen said, “All large companies regularly analyze the market to find future talent. It’s one of our duties as a board to ensure that we have solid succession plans for senior positions. We’d notify the stock market if any changes were made.
Race for the top job: Riders and runners
Lynsey Valentine: Left-field Option
Warren East, long-serving Rolls-Royce chief of defence and nuclear strategy at FTSE 100 could be replaced by the head the James Bond-style technology company.
Charles Woodburn will be Anita Frew’s boss at BAE Systems. Rolls would love to have Charles Woodburn as its boss, especially if they want to focus more on their defense work.
It will also be aware that Woodburn received a raise last year in order to prevent him from moving to another British company.
Ultra Electronics CEO Simon Pryce may be being pursued by the Bosses, as well as Meggitt’s leader Tony Wood. Both companies are in the process of being taken over by US bidders, Ultra in a £2.6bn from Advent International and Meggitt a £6.3billion swoop from rival Parker-Hannifin. Price and Wood might be back in the workforce this year, if they are successful with their deals.
Alternatively, Qinetiq chief Steve Wadey – who has led the hi-tech firm said to have been the inspiration for Q in James Bond since 2015 – could be in the mix.
You could even go for Archie Bethel the gruff Scotsman, who used to be head of Babcock International’s defence group. His reputation was damaged though by Babcock International write-downs.
Lynsey Valentine is Cavendish Nuclear’s strategy director, and could also be a left-field choice if the company wants to expand its nuclear work.
Rolls may choose to hire an insider. Panos Kakoullis (the finance chief) and Tom Bell (defence head and chief executive officer of Rolls-Royce North America), are two prime options.