London. Aircraft engine maker Rolls-Royce has turned to one of Britain’s most successful technology executives, Warren East, to restore its fortunes after a year marred by falling profit, job cuts and cancelled orders.
The British company’s surprise announcement on Wednesday said that John Rishton would retire in July after four years at the helm and will be succeeded by the former head of ARM Holdings, Britain’s biggest listed technology company.
East, who has been a non-executive director of Rolls-Royce since January last year, was chief executive of ARM between 2001 and 2013, overseeing its expansion as a leading developer of microchips for the likes of Apple and Samsung.
Shares in Rolls-Royce rose to an eight-month high in early trading, with JP Morgan upgrading the stock to “hold” from “underweight”.
Analysts at the bank said that East, 53, would bring renewed vigour to the development of civil aviation engines and to the challenges posed by shrinking western defence budgets and a lower oil price that has squeezed customers in the oil gas and marine sectors.
East, who plays the organ at his local church and favours sober suits rather than the polo-shirted look adopted by many US technology executives, said that the opportunity was one he could not refuse.
Rolls-Royce Chairman Ian Davis, meanwhile, spoke of East’s “stellar record” at ARM since taking over after the dot-com bubble burst in 2001. A pound invested in the company’s stock a couple of years later would have been worth 18 pounds ($27) by the time he left.
East’s engineering background with ARM is also seen as a key attribute as Rolls-Royce looks to develop quieter and more efficient engines for aircraft made by Boeing and Airbus , Edison Research analyst Roger Johnston said.
Rolls-Royce shares, which have fallen 19 percent since the start of 2014, were the top gainer on the blue-chip FTSE 100 index at 1204 GMT, up 3 percent at 10.36 pounds.
Rishton, 57, steps down after a difficult period for the 131-year-old company. A decade of strong profit and revenue growth came to an end last year, followed by a warning in February that profit would fall by as much as 13 percent this year.
Chairman Davis acknowledged there had been shareholder disquiet around the time of the profit warnings, but Rishton’s decision to stand down was entirely his own.
Rishton said that after 14 years of being a CEO and CFO he was “leaving for a change of lifestyle”.
East will also take over in the midst of a restructuring programme, with 2,600 jobs being cut from a global total of about 55,000, as the group attempts to compete with bigger and more profitable US rival General Electric.
He will be helped, however, by last week’s momentum-boosting order to supply engines for 50 Airbus A380 planes for Emirates airline. The $9.2 billion deal is the biggest in the British company’s history.
East declined to give details about his strategy before he starts in the role, but he said that “the transformations absolutely need to continue and be driven through to conclusion”.
He will receive a base salary of 925,000 pounds ($1.4 million) a year, plus a pension and performance-related bonus, the company said, adding that the benefits are in line with or below those offered to Rishton.
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