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Rolls-Royce chief Warren East to step down

Rolls-Royce chief executive Warren East is to step down at the end of this year after a turbulent tenure at the top of one of Britain’s largest aerospace companies.

The announcement of East’s exit came as Rolls-Royce said it expected to return to positive free cash flow – a key metric of its performance closely watched by investors – this year.

“We expect to generate modestly positive free cash flow in 2022, seasonally weighted towards the second half of the year,” the company said on Thursday alongside results that showed it returned to profit last year.

Rolls-Royce shares fell 14 per cent in early trading in London to 101p.

The group reported a profit of £ 124mn for 2021, a reversal from a loss of £ 3.1bn in 2020 when the aerospace industry was hammered by the eruption of the coronavirus pandemic. Its revenues slipped from £ 11.5bn in 2020 to £ 11.2bn last year.

Despite the return to profit, the company said it only expected low-to-mid single-digit revenue growth and its operating margin to be “broadly unchanged” this year, disappointing investors.

Nick Cunningham, analyst at Agency Partners, said: “It’s really about fixing what Rolls-Royce has got for the next few years, and speaking of that, it’s disappointing to see Warren East leaving, as he has done a good job in extremely difficult circumstances. ”

Rolls-Royce, which is paid by its customers according to the hours flown by aircraft that are fitted with its engines, took a big financial hit from the grounding of flights during the pandemic.

It was forced to shore up its balance sheet with £ 7.3bn of new equity and debt in 2020. At the time it promised investors it would raise £ 2bn from disposals and is on track to raise that amount after agreeing four disposals, including the sale or ITP Aero, its Spanish subsidiary.

The company said on Thursday it had achieved its target to save £ 1.3bn under a restructuring program a year ahead of schedule. Under the program, Rolls-Royce has shed 9,000 jobs – about a fifth of its workforce.

East said the company had improved its financial performance in 2021 and was now a better balanced business.

“We have achieved the benefits of our restructuring program a year ahead of schedule, positioning civil aerospace to capitalize on increasing international travel,” he said.

Its free cash outflow of £ 1.44bn surpassed analysts’ expectations and was significantly ahead of the outflow of £ 4.18bn in 2020.

East said the company had “simplified the group, fundamentally improved our underlying operations and driven long-term change”.

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