Since taking over as CEO in July, Warren East has undertaken a review of the firm’s operations and will present his initial findings, including details of actions being taken to improve both disclosure and transparency, the firm said.
According to East, the group is undergoing an unprecedented period of change not only in its mix of business and how it accounts for that, but also in its industrial footprint as the firm invests in a “wide-ranging transformation” in order to deal with a change in demand for products, including a doubling of its large engine output.
“These changes, while more painful than we expected in the near-term, are vital to our long-term success,” East said, adding: “My review has underpinned my confidence about the opportunities before us and I am convinced that our long-term outlook is positive. It has also highlighted a number of areas where we can simplify the way we work, inject pace into our decision-making and responsiveness, and improve our operational gearing and operational effectiveness.”
Among the changes to be announced, the firm said it will outline proposals to increase revenue segmentation, raise gross margins across the business and improve trading cash flow analysis.
According to the press release, while the initial findings of the review confirmed that there remain good investment opportunities to strengthen its competitive advantage and highlighted the firm’s “strong portfolio of products and services providing highly differentiated, mission critical, power systems” it also uncovered clear areas for business improvement.
Among these, a complex business model and poor disclosure that have “undermined confidence in the business model in the face of changing markets conditions in several businesses”.
As a result, the firm said plans significantly restructure the business in order to: “simplify the organisation, streamline senior management, reduce fixed costs and add greater pace and accountability to decision making.”
These changes should result in incremental gross cost savings of £150-200m per annum, the firm said with benefits accruing from 2017 onwards, targeting a 1-2 year payback.
