Despite two previous rafts of cuts in senior management which saw 200 management positions eliminated at Rolls-Royce in an attempt to meet target profits, the near break-even for the first six months of this year has seen the implementation of further measures in an attempt to turn round the company’s finances. The company’s intention is to reduce management levels by between 20% and 25% according to comments made by Chief Executive Officer Warren East after the company’s annual shareholder meeting this Thursday.
Further comments from East made it clear that this year’s earnings will be “a little more skewed” toward the second half than Rolls-Royce had anticipated, after the first-half figure will only be “close to break even.” Additionally, East made it clear that if there was going to be a profit shown in the first six months, it will likely be “very, very small.”
Part of the financial problems stem from the slower than anticipated handover rate of the Airbus 350 wide-body jet. Airbus has been beset by delays in delivery of aircraft seating from Zodiac which has had a massive knock-on effect. However, Rolls-Royce are more optimistic that there would be a surge of engine deliveries towards year end. While the Airbus problem accounts for 50% of the engine backlog, transitioning between the Trent 700 and 7000 engines for the current and future A330 models has also had a detrimental effect.
East indicated that Rolls-Royce faces “quite a lot of activity” in 2017 in order to deliver the balance of its savings goal of £150 million to £200 million ($217 million to $290 million), having targeted £30 million to £50 million for 2016, (US$43 million to US$72 million), adding that broader savings potential of approaching £1 billion (US$1.44 billion) was unlikely to be addressed for four-plus years.
The CEO today reiterated full-year guidance that envisages slowing business-jet sales will create a £650 million (US$936 million) hit against earnings, along with a slump in revenue from maintaining regional aircraft and a massive drop in demand at a marine unit which predominantly targets the oil industry.
Learn more on how AviTrader can expand your market