Rolls-Royce to undergo “major restructure”

Posted on 24 Nov 2015 by The Manufacturer

The initial findings of Rolls-Royce chief executive Warren East’s review of operations suggest he is going to be forced to "simplify the organisation, streamline senior management, reduce fixed costs" and speed up decisions.

The changes, expected to be announced later by Mr East, are to help achieve annual gross cost savings of £150-200m per year.

Commenting on the announcement, Mr East said: “My review has underpinned my confidence about the opportunities before us and I am convinced that our long-term outlook is positive.

“It has also highlighted a number of areas where we can simplify the way we work, inject pace into our decision-making and responsiveness, and improve our operational gearing and operational effectiveness,” he added.

While East says he is remaining confident in the long-term outlook, it was only earlier this month that the company announced its fifth profit warning in two years.

According to a statement released by Rolls-Royce this morning, underpinned areas where the business could be improved include a complex business model with high embedded cost. Proposals to increase revenue segmentation, business by business gross margin and trading cash flow analysis will be put in place.

Ian Davis, chairman of Rolls-Royce, said: “As a Board we are committed to providing Warren with the support he needs to implement the findings of his review. He is recommending clear and decisive actions which we fully support and we are committed to ensuring he has the right resources at the highest level to deliver these changes.”