Rolls-Royce chief executive Warren East to set out major restructure to save £200m annually and boost future performance

Catherine Neilan
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"These changes, while more painful than we expected in the near-term, are vital to our long-term success." (Source: Getty)

Rolls-Royce chief executive Warren East will today set out how he plans to make £150m-£200m worth of savings each year from 2017 as part of a major review of the company's operations.

He will propose the company undergo a "major restructuring" process to simplify operations, streamline senior management, reduce fixed costs and add "greater pace and accountability" to decision making.

The company, which is under pressure after a series of profit warnings, will also improve disclosure and transparency in a bid to win investors back. So far this year, Rolls-Royce's share price has fallen 33 per cent as shareholders lose faith in its prospects.

But East will urge investors to stick with the company, highlighting the "strong portfolio" and "good investment opportunities" it has.

He will, however, acknowledge that it is a "complex business model with high embedded costs" and that previous disclosure has "undermined confidence in the business model in the face of changing markets conditions in several businesses".

East said in a statement this morning: "As a group we are undergoing an unprecedented period of change. Change in our mix of business and how we account for it. Change in our industrial footprint as we invest in a wide-ranging transformation. And change in demand for our products as we double our large engine output and manage reductions in demand in other markets.

"These changes, while more painful than we expected in the near-term, are vital to our long-term success."

"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.

"This is fundamental to ensuring Rolls-Royce best positions itself to compete for the long term opportunities before us."

Chairman Ian Davis said the board backed East's plans. "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," Davis added.

The full presentation will take place today between 3:30pm and 6pm, streamed on a live webcast, which you can pre-register for here.

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