Job cuts accelerate to 7,000 at Rolls: Pre-tax profits reach pounds 76m but lay-offs exceed original target and there may be more to come

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ROLLS-ROYCE, the aero-engine and industrial power group, is to shed 2,000 more jobs than planned and close three sites this year to cope with the downturn in civil and military markets.

The accelerated programme of cuts will see 2,800 jobs disappear in the aero-engine division this year, taking the number of redundancies since the start of 1993 to 7,000 against an original target of 5,000.

Rolls' workforce will have fallen from 64,200 in 1990 to 42,200 by the end of this year - a reduction of 35 per cent - due to the decline in defence spending and air travel.

Sir Ralph Robins, chairman, stressed that the latest job losses were not new and had been spelt out to the workforces at individual factories before Christmas.

However, he warned that further job losses were likely beyond the 7,000, saying: 'It would not surprise me if we didn't see a steady reduction in the workforce as we get cleverer at doing things.'

He was speaking as Rolls announced a pre-tax profit of pounds 76m for last year compared with a pounds 184m loss in 1992 after provisions of pounds 268m to cover redundancies and potential loss of orders.

Despite the extensive job cuts and a healthy pounds 6.2bn order book, profits before exceptional items fell by pounds 8m between 1992 and 1993 while the aero-engine business would have suffered a small loss had it not been for a pounds 23m windfall from exchange rate movements.

Profits before interest and exceptional items in the industrial power division fell from pounds 85m to pounds 68m.

Sir Ralph said that the full benefits of the rationalisation at Rolls, expected to yield cost savings of between pounds 100m and pounds 150m a year, would not come through until 1995 or 1996.

Rolls had lived through some 'extremely tough times' and the markets in which it operated continued to be difficult, he added.

But with spending on its new big engine, the Trent, now past its peak, Rolls expects research and development expenditure to fall this year and next year. In 1993 it reached pounds 253m, compared with pounds 229m a year earlier.

Rolls also increased its share of the civil aero-engine market from 22 to 25 per cent in 1993 and tightened its stranglehold on engines for the Boeing 757, winning 97 per cent of all new orders.

Among the big airline orders Rolls is battling for this year are ones from Korean Airlines, which has to select an engine for its fleet of Boeing 777 wide-bodied twin jets, and Singapore Airlines, which is expected to announce an order for the 777 or the Airbus A330. The Trent powers both aircraft.

Although military engine deliveries are set to dip in the next two years, Rolls expects them to pick up sharply in 1996 when Saudi Arabia starts taking delivery of 48 RB199- powered Tornado jets under the Al Yamamah arms-for-oil deal. Rolls' Ardour engine has also been selected to power the US Navy's T45 trainer jet.

Sir Ralph said he wanted to see the limit on foreign shareholdings in Rolls raised from its current level of 29.5 per cent. Foreign holdings presently stand at 25 per cent.

A final dividend of 3p was announced, leaving the payout for the year unchanged at 5p.