Rolls-Royce fires starting gun on finding a replacement for chief executive Warren East as engineering giant rebuilds after Covid crisis
- Chairman Anita Frew has begun drawing up a list of successors for Warren East
- East has led the most prestigious name in British engineering since 2015
- It is thought he could leave as soon as this year
Rolls-Royce has fired the starting gun on finding a replacement for chief executive Warren East as the engineering giant rebuilds after the Covid crisis.
Chairman Anita Frew has begun drawing up a list of successors for East, who has led the most prestigious name in British engineering since 2015.
East has not announced plans to step down but it is thought he could leave as soon as this year. ‘Analysts believe he may leave the FTSE 100 group once it completes a three-pronged recovery strategy he has promised investors.’
Winding down: Boss Warren East has led the most prestigious name in British engineering since 2015
Industry insiders said Rolls was taking a close look at the bosses of FTSE-listed defence companies as possible successors. The company is thought to be using recruitment group MWM Consulting to draw up the lists.
Before the pandemic, the Derby-based engineer earned around half its turnover from servicing large plane engines.
This meant a large chunk of its revenue depended on how many hours the planes flew and that when the pandemic grounded planes for months on end it lost a key source of revenue.
It plunged to dizzying losses, major credit agencies slashed its credit rating to junk status and it rapidly burned through cash.
Defence now makes up around a third of the business and it is becoming less reliant on its work on big plane engines, or its ‘civil aerospace’ division.
One source said that it was a ‘different business now’ and that a chief executive would need to reflect that.
The company’s rules dictate that at least one of the chairman and chief executive must be a British national.
Search: Anita Frew is looking for Warren East’s successor
As Frew is a UK national, this means the new boss could be an international hire.
Before East took over, he spent more than a decade leading Arm Holdings, the Cambridge-based technology group that is in the process of being sold to US chip group Nvidia.
When he joined, he kicked off a restructuring to cut out layers of bloated middle management to trim down costs.
But when Covid hit, he was forced launch the third shakeup Rolls had seen in six years. To combat the crisis, Rolls kicked off a wide-ranging overhaul that included cutting 9,000 jobs from its 52,000-strong workforce, raising money and selling off parts of the business.
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 is on track to reach the disposals target this summer with the sale of Spanish aerospace unit ITP Aero to Bain Capital.
In a recent trading update Rolls said it was likely to hit the £1.3billion cost savings goal by the end of this year. The company has also made huge progress with a long-running project to build mini nuclear power plants that it calls small modular reactors.
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. A Rolls spokesman said: ‘All large organisations regularly review the market to identify future talent and it is one of the board’s duties to ensure we have robust succession plans for senior roles. If there were any actual changes, we would of course make an announcement to the stock exchange.
Runners and riders in the race for top job
Left-field option: Lynsey Valentine
A FTSE 100 defence chief, a nuclear strategist and the head of a James Bond-style tech company coulf be among the possible replacements for longtime Rolls-Royce boss Warren East.
Top of Anita Frew’s list will be BAE Systems’ boss Charles Woodburn. He would be a coup for Rolls if it does indeed want to place more of an emphasis on its defence work.
But it will be mindful that Wood- burn received a pay rise last year to stop him moving to another unnamed British firm.
Bosses may also be eyeing up Ultra Electronics head Simon Pryce and Meggitt’s lead 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 could well be back in the jobs market this year if their deals go through so watch this space.
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.
Or it could go for gruff Scotsman Archie Bethel, the former head of defence group Babcock International, though his reputation has been hit by write-downs at Bab- cock since he left.
A left-field option could be Lynsey Valentine, strategy director at Cavendish Nuclear, if it wants to bolster its work in the nuclear sphere.
Or Rolls might plump for an insider. Two prime candidates are Panos Kakoullis, the finance boss, and Tom Bell, defence head and chief executive of Rolls-Royce North America.