Connect with us

Jobs

Uncertainty lingers over hundreds of Scottish jobs as Rolls-Royce profits surge

Published

on

Rolls-Royce, which powers ships and submarines and makes power generation systems, announced in October that it plans to remove “duplication” and deliver cost efficiencies under a turnaround programme led by chief executive Tufan Erginbilgic. As part of that plan, the company will cut between 2,000 and 2,500 jobs across its global workforce of 42,000 people.

READ MORE: Rolls-Royce jobs: Uncertainty for workers in Scotland

There were no further details yesterday on where those job cuts will fall at Rolls-Royce, which employs about 580 people making engine parts at Inchinnan in Renfrewshire. A spokesman said the company is continuing to consult with employee representatives on the proposals, with no timescale as yet for any update on the specifics.

The group smashed financial expectations for 2023, helped by the cost saving measures. Rolls-Royce said it has already achieved about £150m of the £400m to £500m savings target announced in October.

The company has also benefitted from the rebound in demand for travel since the pandemic, which means that aircraft powered by its engines are flying more. Engine flying hours have recovered to 88% of levels in 2019 and were 36% higher year-on-year.

Mounting military tensions have also benefitted the group, with governments around the world prioritising defence spending. The defence order book reached a record £9.2bn at the end of last year.

Mr Erginbilgic, a former BP veteran who succeeded Warren East, previously warned that Rolls-Royce is a “burning platform” after taking over in January 2023. Speaking yesterday, he said the new approach to managing the business is unlocking the “full potential” of Rolls-Royce.

READ MORE: Government urged to commit to contracts with Rolls-Royce amid plans to cut jobs

“Our transformation has delivered a record performance in 2023, driven by commercial optimisation, cost efficiencies and progress on our strategic initiatives,” he said.

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

The company has predicted that underlying earnings will rise further, to between £1.7bn and £2bn, in the current year. Free cashflow is expected to come in at between £1.7bn and £1.9bn.

Analyst Natalya Davies of Edison Group described the company’s performance as “exceptional”, while Jarek Pominkiewicz of Quilter Cheviot said the results were “impressive”.

READ MORE: Rolls-Royce profits soar as international air travel returns

“The company delivered a positive surprise with its power systems and defence segments, which both exceeded the guidance and showed robust growth,” Mr Pominkiewicz said. “Power systems, which provides engines and power solutions for various industries, saw a 16% increase in revenue and a 44% increase in profit, driven by strong demand in marine, rail and power generation markets.

“Defence, which supplies military aircraft engines and equipment, achieved a 12% increase in revenue and a 30% increase in profit, benefiting from favourable contract mix and operational efficiency.”

Shares in Rolls-Royce closed more than 8% higher yesterday, up 27.3p at 356.8p by the close of trading.

Continue Reading