Engine maker Rolls-Royce has signalled further job cuts amid plans to slash costs “significantly” as it bounced back from record losses with a £4.9 billion annual profit haul.
The group confirmed it had hired advisers Alvarez & Marsal to help it move to a “considerably” simplified staff structure as part of the wide-ranging restructure announced in January in what has sparked fears over fresh management job cuts.
Rolls made the comments as it revealed it swung out of the red last year with pre-tax profits of £4.9 billion, thanks to a £2.6 billion accounting boost from the pound’s recent bounce-back.
This marked a recovery from a dire 2016, when it fell into the red by £4.6 billion in what was its largest ever loss and one of the biggest in UK corporate history after being hit by the pound’s plunge and a corruption scandal.
On an underlying basis, Rolls saw annual pre-tax profits rise 25% to £1.1 billion in 2017.
Chief executive Warren East said Rolls had made “good progress in 2017”.
He said it was too early to say how many jobs will be affected under the restructure, but confirmed the shake-up will lead to a slimmed down corporate centre and will cut out duplication in its support and management functions.
It comes after around 600 managers have left the group since 2015 under a previous overhaul.
But Mr East stressed the revamp was not set to affect engineers, with plans to invest £1.4 billion in research and development and to hire engineers and technology experts.
He said: “The business unit simplification and restructuring programme that we announced this January will drive further rationalisation and is a fundamental step in the journey started two years ago to bring Rolls-Royce closer to its full potential both operationally and financially.”
Rolls plans to update on the overhaul in the middle of the year.
Rolls said 2018 results would be hit by costs relating to repairs on some of its engines.
It revealed a hit of around £340 million in 2018 for the cost of repairs on existing engines, following a £170 million charge in 2017, with around another £240 million due in 2019 to cover the issue.
Up to 500 Trent 1000 engines – used on Boeing 787 planes – and some Trent 900 engines are affected by the issues, which see components wear out earlier than expected.
It said underlying operating profits are expected at around £400 million for 2018, but could fall to £300 million at the lower end of forecasts, which would be a drop from £321 million reported for 2017.
Despite the warning, Rolls shares rose more than 8% after the results.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here