Rolls-Royce to Remain A Diversified Engine Maker
November 24 2015 - 7:50AM
Dow Jones News
LONDON—Rolls-Royce Holdings PLC on Tuesday signaled its
commitment to remain a diversified engine maker ahead of an
investor briefing to outline restructuring measures after a series
of profit warnings.
Chief Executive Warren East, who took over as head of
Rolls-Royce in July, is to present the findings of an operational
review Tuesday afternoon.
The review "highlighted a number of areas where we can simplify
the way we work, inject pace into our decision-making and
responsiveness, and improve our operational gearing and operational
effectiveness," the company said in a statement.
Mr. East has repeatedly stressed the review was focused on
operations. Strategic decisions, such as whether to divest business
lines, weren't on the agenda, he has said, after concerns were
raised its land and sea engines business are a drag on its
aerospace activities.
U.S. activist investor ValueAct Capital Management LP has become
Rolls-Royce's largest shareholder and is seeking a seat on the
company's board, Rolls-Royce has said. The London-based company
last week disclosed ValueAct now holds more than 10% of its
shares.
The maker of engines for Boeing Co. and Airbus Group SE
airliners said its medium to long-term outlook remained strong and
included a "focused power systems portfolio" that would deliver
growth and cash generation.
Ian Davis, Rolls-Royce's chairman, said the new chief executive
"is recommending clear and decisive actions which we fully support
and we are committed to ensuring he has the right resources at the
highest level to deliver these changes."
Rolls-Royce reaffirmed it expects cost savings of 150 million
pounds ($226.9 million) to £ 200 million a year from 2017.
Rolls-Royce said earlier this month its earnings outlook for
next year had worsened and it may cut its dividend, prompting the
worst selloff in the company's stock in 15 years. The company has
struggled to deliver on cost-cutting efforts and been hit by
weakening demand for some civil aircraft engines, its largest
profit contributor.
Rolls-Royce billed the changes as a "major restructuring" that
would streamline management and make it more accountable, reduce
fixed costs and expedite decision making. "This is fundamental to
ensuring Rolls-Royce best positions itself to compete for the
long-term opportunities before us," Mr. East said.
The company said there was "clear areas for business
improvement" including its complex business model. There are also
investment opportunities to strengthen its position in some
markets, Rolls-Royce said, without providing details.
Write to Robert Wall at robert.wall@wsj.com
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(END) Dow Jones Newswires
November 24, 2015 07:35 ET (12:35 GMT)
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