Rolls-Royce To Cut 4600 Jobs

17 June, 2018, 19:02 | Author: Regina Silva
  • Rolls-Royce XWB jet engine testbed

The latest update, given as the firm hosted its 2018 Capital Markets Event, came a day after Rolls-Royce confirmed it is to cut 4,600 jobs, predominantly in the United Kingdom, as part of a plan to simplify its business and save £400mln a year by the end of 2020.

Shares in Rolls-Royce Holdings (LON:RR) have soared in London this morning, as the British engine maker forecast that it will exceed its cash flow target by 2020.

'After a decade of significant investment we are committed to delivering significantly improved returns, while continuing to invest in the innovation needed to realise our long-term ambition to be the world's leading industrial technology company, ' chief executive Warren East said.

"We will be significantly reducing the size of our corporate center to remove the complexity and duplication", according to Rolls' announcement.

The UK-based engineering firm says that after an initial cost of £500 million ($665 million), it expects the restructuring to reduce annual costs by £400 million ($532 million) by 2020. Finally, Societe Generale raised shares of Rolls-Royce to a "hold" rating and lifted their price target for the company from GBX 725 ($9.65) to GBX 970 ($12.91) in a research note on Thursday, March 8th.

The most advanced turbine blade casting facility in the world was officially opened by Rolls-Royce on the Advanced Manufacturing Park (AMP) in Rotherham in 2014. These cash costs will be incurred across 2018, 2019 and 2020 and, given the one-off nature of the restructuring programme, these will be reported below group underlying free cash flow (FCF). The company was maintained on Friday, April 6 by Goldman Sachs.

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The business also recently announced a dividend, which will be paid on Monday, July 2nd.

Rolls shares traded 2.7 per cent higher at 851 pence early yesterday after it published details of the plan. Britain's biggest union Unite warned Rolls-Royce against cutting "too deep and too fast".

A similar Intermediate Pressure Compressor durability issue has now been identified on a small number of engines from a different version of the Trent 1000.

Having discovered that parts of the engine were not lasting as long as expected, the company is having to ground planes to carry out inspections, forcing airline clients to lease alternative planes to meet demand in the busy summer period. The company itself pointed to risks inherent to the business, such as expensive problems that have bedevilled its Trent 1000 engine model.

Rolls-Royce has 55,000 employees worldwide, of which 26,000 are in Britain.

"I know it sounds incongruous at face value, the loss of the workforce while we are dealing with these issues but they are really two separate issues altogether", East said.

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