Tech pioneer takes Rolls-Royce helm

A celebrated technology executive is to take on one of the trickiest jobs in British industry - reviving the fortunes of Rolls-Royce, a company which symbolises British manufacturing prowess but which has been hit by a string of profit warnings and questions over its strategy.

Warren East, the former boss of Arm Holdings, will become chief executive of Rolls-Royce, replacing John Rishton, who shocked investors on Wednesday by saying will step down in July.

The 109-year-old company is a global leader in manufacturing engines for large passenger jets. But a series of profit warnings last year and investigations into alleged bribery and corruption have overshadowed Mr Rishton's record in office. Rolls-Royce's share price fell 32 per cent in 2014.

The company last year reported its first profit decline in more than a decade, and low oil prices this year are expected to deal another blow to Rolls-Royce's performance.

Investors have also expressed concern over the company's strategic direction, particularly its desire to expand its marine and power systems business.

One of the most pressing questions Mr East will face when he takes the helm is whether Rolls-Royce should reverse this strategy and instead focus on its core aerospace and defence business.

Mr Rishton, 57, who became chief executive in 2011, said he had decided to retire "to have a little rest and spend more time with my family". He is understood to have told the Rolls-Royce board late last year of his intentions, around the time he announced a wide-ranging restructuring that will involve 2,600 job cuts.

The news was a "bolt from the blue", according to investors and analysts, who only last week had been reassured by the company's win of a $9bn passenger-jet engine order, the largest in its history.

Rolls-Royce pointed out that under Mr Rishton's leadership, group profits had increased by 69 per cent since 2011, on sales up by just over a third.

However, investors were reassured by the appointment of Mr East, an engineer who is highly regarded from his tenure as chief executive of Arm. He is widely credited with transforming it into a global leader in chip designs for smartphones.

Mr East's expertise will be critical in a company which faces important technological decisions in the coming years, with a need to re-enter the booming market for engines for narrow-body passenger jets.

"This decision [to change chief executive] has greatly surprised me," said one top 10 investor. "But I think this shows that Rolls is addressing the issue of the group's underperformance."

Another top 10 investor said: "This is a surprising decision. I was happy with Rishton and felt that Rolls needed more time to deliver." A top 20 investor said: "Mr East is a very good appointment."

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However, he hinted there could be greater and faster change at Rolls-Royce, using his experience of building Arm from a technology upstart to global leader.

Ian Davis, Rolls-Royce's chairman, stressed that Mr Rishton's departure would not lead to a change in the group's strategy.

Mr Rishton will depart on July 2. He receives no pay-off beyond his statutory entitlement, the group said.

Mr East's base salary will be £925,000. Benefits would be in line with or below those received by Mr Rishton, the company said.

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