Rolls-Royce CEO Replaces Finance Chief in Management Shake-Up -- 2nd Update
September 22 2016 - 5:56AM
Dow Jones News
By Robert Wall
LONDON-- Rolls-Royce Holdings PLC boss Warren East is replacing
his finance chief in a move that amplifies the scale of the shake
up under way at the British aircraft-engine makers after a series
of profit setbacks and a dividend cut.
Rolls-Royce's chief executive is bringing in Stephen Daintith,
52, to replace current Chief Financial Officer David Smith who is
set to leave the company next year after a transition period.
Mr. Daintith is CFO at Daily Mail & General Trust PLC, the
British newspaper and magazine publisher, and previously an
executive at Dow Jones, the publisher of The Wall Street Journal.
Mr. Daintith, who was considered a potential CEO candidate at his
current employer, is expected to join Rolls-Royce early next
year.
The move is the highest-profile management change on Mr. East's
watch since he took the helm at the London-based company last year.
Mr. East arrived after a series of profit warnings at Rolls-Royce
disappointed investors, sending the stock price tumbling. Other
departures since have included the head of the company's aerospace
operations and its land and sea activities.
The appointment of Mr. Daintith also adds another executive with
little manufacturing experience at a time Rolls-Royce faces an
unprecedented ramp-up in output for large commercial jetliner
engines for plane makers Boeing Co. and Airbus Group SE. Mr. East
previously worked at computer chip maker ARM Holdings PLC.
The news initially unnerved investors, with Rolls-Royce shares
falling around 2% in early trading.
To help plug the gap in operational experience, Mr. East in
September announced Simon Kirby would join as chief operating
officer. He currently runs government-owned HS2 Ltd., the company
charged with building a new high-speed rail system in the U.K. and
with prior experience in the British defense industry.
More changes loom at Rolls-Royce. Mr. East has signaled the
company may shed some activities, such as in its marine sector.
Rolls-Royce, which no longer is affiliated with the luxury car
maker, said profits and sales would fall this year.
Management has about two years to show it is making progress
revamping the business after activist investor ValueAct Capital
Management LP became its largest shareholder. Bradley Singer,
ValueAct's chief operating officer, was named to the Rolls-Royce
board in March under an agreement not to push for changes in the
company strategy until at least the 2018 annual shareholder
meeting.
Rolls-Royce said the precise date when Mr. Daintith would join
and his predecessor would depart haven't been fixed yet.
Rolls-Royce has been struggling with weak demand for some of its
aircraft engines. The prolonged slump in oil prices also has damped
sales of its marine and power-systems units. The London-based
company this year announced the first cut in its dividend since
1992 to deal with falling earnings.
Mr. East has been trying to streamline the company and announced
plans to eliminate at least 600 management positions, most at its
aircraft engine unit, to deliver cost savings and boost
profitability. Rolls-Royce also is shedding 2,600 other jobs at its
aerospace unit and 1,000 in its marine business to achieve GBP150
million ($195 million) to GBP200 million in annual cost savings by
the end of next year.
Mr. Daintith had "deep understanding of international business
and his record of achievement in change management are particularly
relevant to Rolls-Royce as we build our business and respond to the
growing global requirement for our technology," Mr. East said.
Mr. Smith joined Rolls-Royce in January 2014 as CFO of the
aerospace division and was elevated to role at the corporate level
less than a year later after 27-year company veteran Mark Morris
departed after a series of profit warnings.
Mr. Daintith will receive a base salary of GBP680,000
($882,800).
Write to Robert Wall at robert.wall@wsj.com
(END) Dow Jones Newswires
September 22, 2016 05:41 ET (09:41 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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