Bradley Singer, ValueAct’s CEO, has been awarded a board seat at Rolls-Royce as a non-executive director in an attempt to recover from a number of profit warnings in recent months. The US activist investor’s chief operating officer arrives as Rolls-Royce reported the first cuts in the company’s dividend in nearly 25 years. The profit warnings come as the leading engineer, manufacturer and distributor of luxury automobiles worldwide continues to suffer the high costs of manufacturing which have negatively impacted upon margins causing competitors to close the gap on this once all-conquering global business. The outlook remains positive but Rolls-Royce has also acknowledged that its aerospace division is also suffering with the recent transition to the next generation of engine proving to be less profitable.
Rolls-Royce chairman Ian Davis hopes the appointment of Singer will bring the sort of financial know-how needed to boost the company’s flagging profit margin. Davis said Singer’s experience of the institutional investor community in the United States will prove invaluable.
The agreement will see Rolls-Royce offer ValueAct a board seat as long as the shareholder remains a substantial part of the business which at present sees it maintain a 10% stake in the Group. The expectation is that this collaboration will last many years.
The appointment hasn’t come without some scepticism. Davis noted that a couple of its UK-based investors felt uncomfortable about ValueAct being a major shareholder. Yet, unlike some notable hedge-fund activists (the likes of Carl Icahn and Daniel Loeb), ValueAct stays tight-lipped when it comes to the companies it shares a common interest in. To satisfy nerves, Davis stated that there are no plans to break up the Group and that its ambitions remain focused on strengthening Rolls-Royce’s aerospace and power systems endeavours.