The boss of Rolls-Royce has announced a sweeping shake-up aimed at reversing years of under-performance.
Chief executive Tufan Erginbilgic described the FTSE 100 engine maker as a ‘burning platform’ shortly after taking over at the start of the year.
And yesterday he declared: ‘No company can continue like this and therefore we need to change.’
Rolls-Royce chief executive Tufan Erginbilgic has announced a sweeping shake-up aimed at reversing years of under-performance
A strategic review aiming to identify the company’s priorities for investment will report in the second half of the year – and Erginbilgic said a plan to turn around its fortunes was already under way ‘at pace’.
Shares surged 23.7 per cent, or 25.48p, to 133.1p – hitting their highest level since November 2021 – as underlying operating profits rose 57 per cent to £652million.
Erginbilgic, a former BP executive, took the controls at Rolls-Royce at the start of January and has been quick to make his presence felt.
He hinted the company has been spreading itself too thin, saying: ‘We have been trying to keep too many options open.’
He added: ‘We have been under-performing financially for many years. I think it is really important to be honest with our people to help them understand the reality we face and the need for change.’
The planned shake-up could send a chill through a business which has already gone through thousands of job cuts after the pandemic brought it to the brink of collapse.
Now, it is recovering, helped by the upturn in aviation after lockdowns. Flying hours in the large engines it sells to airlines were up 35 per cent but still a third below pre-pandemic levels.
The company expects profits to climb to as much as £1billion for 2023 as the recovery continues.
But Erginbilgic said it was not just Covid that was responsible for the company’s woes over recent years, indicating that it was doing worse than rivals and that returns to shareholders were low even when excluding the crisis year of 2020.
He said while the latest results showed improvement it was from a ‘very low base’. Since joining, Erginbilgic has toured major sites in Britain, the US and Germany and said they ‘all have a great potential to create value for Rolls-Royce’.
He said his review aimed to simplify the business and address its ‘footprint’ – understood to mean the number of sites it has – but declined to confirm that Rolls would have to exit some of its businesses, or shrink.
Erginbilgic signalled that Rolls’s core engine-making operations had a bright future. But that fuelled speculation about what might happen to other operations, such as making propulsion systems for electric flying taxis.
Erginbilgic signalled support for the company’s plans to build a fleet of mini nuclear reactors around the UK, seen as a key part of the transition to net zero, but reiterated concerns expressed by his predecessor Warren East about the need for government support.
George Zhao, analyst at private wealth manager Bernstein, said it was notable that Erginbilgic talked about the merits of a number of businesses but not electric aircraft, and that could be an area where Rolls must make a decision on continued investment.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: ‘The work in knocking the company into a more efficient shape is only just getting going.’
