New boss fires up engines at Rolls-Royce

The Rolls-Royce boss has announced a sweeping shakeup aimed at reversing years of underperformance.

Chief Executive Tufan Erginbilgic described the FTSE 100 engine maker as a “burning platform” shortly after taking over earlier in the year.

And yesterday he declared: ‘No company can continue like this and that’s why we have to change.’

A strategic review aiming to identify the company’s investment priorities will be reported in the second half of the year, and Erginbilgic said a plan to turn around its fortunes was already underway “at pace.”

Shares rose 23.7%, or 25.48 pence, to 133.1 pence, hitting their highest level since November 2021, as underlying operating profit rose 57% to £652m.

Erginbilgic, a former BP executive, took the helm at Rolls-Royce in early January and has been quick to make his presence felt.

He hinted that the company has been stretching itself too thin, saying: “We’ve been trying to keep too many options open.”

He added: ‘We have underperformed financially for many years. I think it’s really important to be honest with our people to help them understand the reality we are facing and the need for change.’

The planned shakeup could send chills to a business that has already seen thousands of job cuts after the pandemic brought it to the brink of collapse.

It is now recovering, helped by the rebound in aviation after the lockdowns. Flight hours on the large engines it sells to airlines are up 35 percent, but still a third below pre-pandemic levels.

The company expects earnings to rise to up to £1bn by 2023 as the recovery continues.

But Erginbilgic said it wasn’t just Covid that was to blame for the company’s woes in recent years, indicating it was doing worse than its rivals and shareholder returns were low even if the year of growth is excluded. crisis of 2020.

He said that while the latest results showed an improvement, it was a “very low base.” Since he joined, Erginbilgic has toured major sites in Britain, the US and Germany, saying “they all have great potential to create value for Rolls-Royce.”

He said his review was aimed at simplifying the business and addressing its ‘footprint’, understood as the number of sites it has, but declined to confirm that Rolls would have to exit some of its businesses or scale back.

Erginbilgic noted that Rolls’ core engine manufacturing operations had a bright future. But that fueled speculation about what might happen to other operations, such as making propulsion systems for electric flying taxis.

Erginbilgic signaled his support for the company’s plans to build a fleet of mini-nuclear reactors across 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 support. of the government.

George Zhao, an analyst at private wealth manager Bernstein, said it was notable that Erginbilgic spoke about the merits of a number of deals, but not electric planes, and that could be an area where Rolls needs to make a decision on the continuous investment.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “The work to bring the company to a more efficient shape is just beginning.”