Rolls-Royce pledges greater openness with investors
John Rishton, chief executive of Rolls-Royce, pledged greater openness with investors in a bid to restore relations with a financial community smarting after a series of profit warnings.
The group would have “more meetings, listen more, reflect more and provide more formal access”, said Mr Rishton in an interview with the Financial Times. “What we are trying to do is change our approach.”
Britain’s most admired engineering group fell from grace this year after a series of botched communications and missteps. As well as the profit warnings, it was reprimanded by the UK’s Financial Reporting Council for using aggressive accounting practices and is under investigation by the Serious Fraud Office for alleged corruption relating to deals in China and Indonesia. Its shares have fallen a third during 2014.
Mr Rishton said the group was working on ways to give better guidance to investors and would implement them once he was sure Rolls-Royce would “get it right”.
Investors have high hopes that David Smith, the group’s new finance director, will help a traditionally closed group to deliver guidance in a more consistent manner. They were particularly angered by the company’s failure to alert the market to a downturn in defence, which Mr Rishton said had been identified in 2013, but not communicated until February 2014 because of the group’s habit of giving guidance only in the current year.
Mr Rishton said some of the errors were due to the fact that Rolls-Royce had been trying to respond to investor demands for greater transparency. The company had held two investor days this year, which was unprecedented, he said.
His comments come as Rolls-Royce prepares to ramp up production of its new XWB engine, which will power the new Airbus A350 aircraft. The engine has taken 10 years and cost more than £1bn to develop, and will be a test of Rolls-Royce’s ability to deliver at volume and on time.
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To do so, Mr Rishton said the company would have to reduce costs and improve processes, as well as make better use of state of the art facilities such as the recently opened factory in Singapore. He reiterated the group’s target to cut its global manufacturing footprint by 20 per cent. “I have too much capacity,” he said. “I have to get out of old stuff.”
He said that Mr Smith had been given two tasks: the first to make sure management had “robust information” and the second to “make sure our cost-performance delivery is where it needs to be”.
Mr Smith replaced Mark Morris, a 27-year veteran of Rolls-Royce, who left the group in November when it announced 2,600 jobs would go as part of £120m cost reduction plan.