Rolls-Royce cost-cutting overhaul ‘well under way’ as it swings to £2.4bn profit

Engine-maker Rolls-Royce has said cost-cutting plans that will see it axe up to 2,500 jobs by the end of next year were “well under way” as it swung to a £2.4 billion annual profit.

The aerospace engineering specialist reported the statutory pre-tax profits for 2023 against losses of £1.5 billion in 2022, boosted by cost savings and better-than-expected revenues.

Underlying operating profits more than doubled to £1.6 billion for 2023, up from £652 million the previous year, as revenues jumped 22% to £16.5 billion.

Rolls said it had already delivered around £150 million of its £400 million to £500 million cost savings target announced in October, when it revealed that between 2,000 to 2,500 roles would go as part of the plans.

The group said: “Our actions to deliver sustainable cost efficiencies and improve competitiveness are well under way.”

It forecast that underlying earnings would lift again over the year ahead, to between £1.7 billion and £2 billion.

Rolls cautioned that supply chain “challenges” would continue for up to another two years while also flagging ongoing pressures from geopolitical uncertainty and inflation.

The company said engine flying hours – a key performance measure for the group – recovered to 88% of the levels seen in 2019 before the pandemic struck and were up 36% year on year.

It added that large engine orders were the highest they had been since 2007 and forecast that large engine flying hours would bounce back to – or even surpass – pre-pandemic levels in 2024.

Rolls, which employed 42,000 people before the latest round of job cuts, said in October it planned to remove “duplication” and deliver cost efficiencies through the latest stage in its transformation plan.

The company’s plans include creating a new procurement division in order to reduce costs by leveraging the group’s scale, with aims to slash procurement costs by £1 billion.

It also said some back-office operations, such as human resources and finance, will be brought closer together.

Tufan Erginbilgic, chief executive of Rolls, said: “Our transformation has delivered a record performance in 2023, driven by commercial optimisation, cost efficiencies and progress on our strategic initiatives.

“This step-change has been achieved across all our divisions despite a volatile environment with geopolitical uncertainty, supply chain challenges and inflationary pressures.”