Rolls-Royce’s fortunes might finally be turning around, and giving their biggest investor more say in how the company is run looks to be helping.
Reports from Sky News suggest that senior representatives from Rolls-Royce and the company’s biggest shareholder, American investor ValueAct, will meet this week to discuss the future of the company following a terrible few years.
The company has had an absolutely torrid time in the past couple of years. It has issued five profit warnings since February last year, and shares have lost more than 50% of their value since the end of 2013.
But it now looks like allowing ValueAct to get more involved is allowing one of Britain’s most recognisable brands to start to get itself back on the right track. At least that’s what investors seem to think. Rolls shares have popped by about 3.5% so far on Monday, a rise of more than £0.20.
This carries on from a good few weeks for stock in the company. Shares have gained more than £1 in value since the middle of November, recovering a chunk of the big losses that have plagued shareholders for the last couple of years.
This is what the company’s stock has done since late 2013:
But things have started to pick up a little in the last few weeks:
The key to this slight upturn in confidence from investors seems to be the company’s increasing willingness to make changes to its business, and give greater involvement to its biggest investor — ValueAct.
New chief executive Warren East, who took over charge of the company from John Rishton in July, has already instigated a huge review of Rolls’ business. According to one source who spoke to the Daily Telegraph the review was designed as “the first step in restoring investor confidence”. That seems to be working if the recent share price movements are anything to go by.
The business review’s initial findings suggested that many of the company’s senior staff could lose their jobs.
Giving ValueAct a bigger role
ValueAct recently increased its stake in the engineering firm to more than 10%, making the angel investor Rolls Royce’s the biggest stakeholder. The fund, headed up by Jeff Ubben, has been pushing for a seat on Rolls-Royce board in the past few weeks, something that investors have been rumoured to strongly support.
Whilst Rolls doesn’t seem to be prepared to give ValueAct that seat just yet, there are strong signs that chief executive Warren East is willing to let ValueAct have a bigger say in what goes on in the company.
Over the weekend, Sky News reported that senior ValueAct representatives will hold a series of meetings with Rolls-Royce bosses, including aerospace division president Tony Wood, at their headquarters in Derby. It was also reported that Warren East and chairman Ian Davis could meet with ValueAct’s representatives in London, although these reports weren’t confirmed.
As well as asking for a seat on the board, ValueAct is thought to be pushing Rolls-Royce to sell its marine engine division, which has been underperforming in the past couple of years. East has so far resisted this suggestion.
Exactly what the talks will be about has not been confirmed, but Rolls-Royce was keen to stress that they would be on friendly terms. The company said in a statement over the weekend that: “Our engagement with ValueAct continues to be constructive and we share a common belief in the long-term prospects of our business.”
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