Despite bouncing back from record losses to notch up a £4.9 billion profit in 2017, UK-based engine maker Rolls-Royce revealed on Wednesday that further managerial job cuts were in the pipeline.

Rolls-Royce employee restructuring

Although the firm said it was planning to hire more engineers and technology specialists in a £1.4 billion investment in R&D, it said it planned further “significant” cost-cutting measures after two years when it had parted company with about 600 managers.CEO Warren East said it was too early to say how many jobs would be affected under the restructure, which is being planned by advisers Alvarez & Marshal, but said it would lead to a slimmed down corporate structure and would reduce duplication in its support and management functions.Mr East, who promised an update on the restructuring in the summer, 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.”

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The chief executive also admitted that a fault in Rolls-Royce’s Trent 100 engines, which has grounded planes at BA, Air New Zealand, Japan’s ANA and Birgin Atlantic, could take “some years” to fix, but said the company had a solution to the problem.Mr East told BBC Radio 4’s Today programme, “First you have to realise that all mechanical things wear out over time, and some of the parts in our Trent engines are wearing out faster than we originally forecast.“We’re having to manage the operational impacts because it’s quite disruptive for our customers. We have a solution, we have a plan, it will take some years to fully implement the modifications in all the engines which are in service.”

Profit increases cheer investors

The firm’s better-than-expected, pre-tax profit of £4.9 billion for 2017, which was boosted by sterling’s fall against the dollar, follows a loss of £4.6 billion – the largest in the company’s history – the year before. Mr East said the firm had made “good progress” last year but warned the 2018 results would be hit by costs relating to the Trent engine repairs.In its profit report, Rolls said the Trent problems cost £170 million last year: a figure expected to rise to £340 million this year and another £240 million in 2019.Company shares surged on international markets on the profits report. “Investors cheered a 25 per cent increase in full year underlying pre-tax profit and a six per cent jump in reported revenue,” said Connor Campbell, analyst at Spreadex trading group. “Warren East’s commitment to a ‘more fundamental restructuring programme’ set to deliver ‘a significant reduction in costs’ also helped.”

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Read more about the UK industry in the Winter issue of our magazine 

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