Business World

Monday 23 September 2019

Rolls-Royce sets out turnaround strategy

Technicians at work in a Rolls-Royce factory
Technicians at work in a Rolls-Royce factory

British engineering company Rolls-Royce said it would launch a major restructuring programme, as its new chief executive Warren East gave further details of his plans to turn around the company..

After four profit warnings in just over a year, the aero-engine maker was already under pressure to outline how it would return to growth, but it now faces additional impetus from activist shareholder ValueAct, which last week raised its stake to 10pc.

"(The) major restructuring will simplify the organisation, streamline senior management, reduce fixed costs and add greater pace and accountability to decision making," Rolls said in a statement ahead of a presentation to investors later on Tuesday.

At the presentation, East, who took over the CEO job in July, will update shareholders on the findings of a review of operations.

He had already announced some of the plans, including the cost-savings of £150m-£200m per year he is targeting.

Rolls-Royce chairman Ian Davis said in a statement that the board was committed to providing East with the support he needed to implement the findings of his review.

The US activist hedge fund has been pressing for a seat on Rolls-Royce's board and is reported to want the company to focus on its main aero-engine business, which accounts for about half of profits, and divest its unit which makes engines for marine customers.

Shares in Rolls-Royce have plunged 15pc since its last profit warning on November 11, as the company struggles to cope with shrinking demand for marine engines and declines in its aero-engine business, where fewer of its older, more profitable engines are bought or require servicing.


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