Rolls-Royce – the global jet engines-to-nuclear subs giant – has outlined plans to cut up to £500 million in costs in a bid to boost profits.
The Derby engineering firm, which also has a big site in Filton, near Bristol, announced today the changes could see it offload its electric planes division as it concentrates on its other units – including getting more value from its Trent and Pearl engines, investing in its new UltraFan engines and backing its other transport, combat and submarine programmes.
Management also plan to keep investing in Small Modular Reactors and micro-reactors, where there are both defence and civilian applications, as well as areas such as battery energy storage and power systems for the maritime sector.
Rolls-Royce said in order to deliver operating profits of between £2.5 billion and £2.8 billion by 2027 – a big increase from the £837 million it made last year – costs would have to be scaled back.
The business, which said last month that it will cut up to 2,500 jobs, said it wants to make savings of around £400 million-£500 million by 2027.
Most of that will come from its core civil aerospace division, where it plans to increase the margins in its service agreements for engines.
That means things such as increasing the time that an engine is on the plane, reducing the costs of visits to the workshop and being tougher with contract terms and conditions.
It wants margins at the civil aerospace division to increase from the 2.5 per cent seen last year to 15-17 per cent later this decade.
Most Read
The company also wants to raise around £1 billion to £1.5 billion by selling parts of the business over the next five years, which could include Rolls-Royce Electrical, which is developing electric aircraft.
Chief executive Tufan Erginbilgic said: “Rolls-Royce is at a pivotal point in its history. After a strong start to our transformation programme, we are today laying out a clear vision for the journey we need to take and the areas where we must focus.
“We are setting compelling and achievable financial targets for the mid-term which will take Rolls-Royce significantly beyond any previous financial performance.
“This will benefit not just our shareholders but our people, customers and partners.
“We are building ‘one Rolls-Royce’ – a company that can fully realise its potential, ensuring the excellence and innovation that helped shape the modern world endures long into the future.”