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Rolls-Royce's lead investor reduced its stake in the aircraft engine engine, with the president expressing "regret" for the disruption caused to airline customers due to persistent problems with its Trent 1000 engines during the past year.
The decision was made when the group revealed that, despite last year's turbulence, its managing director, Warren East, had seen his annual pay rise 70% to £ 3.94 million last year in the form of long-term bonuses earned for the first time in four years.
The company FTSE 100, which has seen a slight decline in its share price, tries to address the long-standing problems caused by its Trent 1000 engines, which equip the Boeing 787 Dreamliner, which forced the group to change to red. 'last year.
ValueAct Capital, which became Rolls-Royce's largest shareholder in 2015, said it had reduced its stake from 10.94% to 9.48%.
A year later, the activist investor was given a seat on the board of directors after being committed to not lobbying publicly for a dissolution of the company. manufacturer of jet engines.
Mr. East's 57-year salary included a base salary of £ 944,000, a little over £ 1 million, or 107% of his base salary, in the form of an annual bonus. £ 1.73 million paid under a long-term incentive plan for 2016, and retirement benefits.
Although the CEO's annual bonus was lower than the previous year, reflecting engine deliveries to underperforming customers, total compensation remains below the £ 2.33 million he has received in 2017.
Rolls-Royce defended the outstanding payment, noting: "Warren's annual bonus is down due to the failure of our delivery targets to customers at the end of 2018, although we have achieved strong performance in terms of underlying profit and cash. flow. "
The spokesperson added, "In the three years since the beginning of 2016, Rolls-Royce has achieved strong performance in terms of cash flow, earnings and shareholder returns. As a result, Warren's overall compensation increased after the first successful payment of our long-term contract. term incentive plan in four years. "
The company announced in February that it would increase the exceptional load related to the £ 236m Trent 1000 engine problems for the full year to £ 790m. The increase "reflects a contribution to the costs badociated with the disruption of the customer," said the company at the time.
Additional charges, including £ 186m on its Trent 900 program following Airbus' decision to stop production of the A380 superjumbo, led Rolls-Royce to an operating loss of £ 1.16m in a full year.
Ian Davis, president of Rolls-Royce, acknowledged that the Trent 1000 engine problems had "caused problems for us and, more importantly, for many of our customers."
"At the end of the day, companies are there for their customers and we regret the disruption. This has been an area of focus and ongoing monitoring by the board of directors, "he said in the annual report.
Rolls-Royce, led by East, has launched an ambitious restructuring program, including a streamlined corporate structure and the loss of 4,600 middle management jobs. Davis admitted that the "pace of implementation of the company was uneven." Nevertheless, "the signs of progress are clear".
"Your board and management team absolutely recognize the need to improve our competitiveness and operational performance, particularly in our civil aerospace sector," Davis said in his report. report.
The company said on Monday that no executive director would be entitled to salary increases in 2019. The bonus for 2019 would also include an additional measure of the number of aircraft on the ground to reflect any disruption to aircraft operations. engines of the airline.
Rolls-Royce reiterated earlier comments that it had implemented emergency plans to prepare for a tough Brexit, including the constitution of an inventory.
"We will continue to monitor our emergency measures during the Brexit process and the board of directors is regularly informed of our risk mitigation activities," the company said.
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