Rolls-Royce warns it could cut more jobs despite making £4.9bn in profit

The engine maker bounced back from record losses of £4.6bn in 2016

The company plans to invest £1.4bn in research and development (EPA)

Engine maker Rolls-Royce has signalled further job cuts amid plans to slash costs “significantly” as it bounced back from record losses with a £4.9bn annual profit haul.

The group confirmed it had hired advisers Alvarez & Marsal to help it move to a “considerably” simplified staff structure as part of the wide-ranging restructure announced in January, which has sparked fears about fresh job cuts.

Rolls-Royce made the comments as the company revealed it swung out of the red last year with pre-tax profits of £4.9bn, thanks to a £2.6bn accounting boost from the pound’s recent bounce-back.

This marked a recovery from a dire 2016 when it fell into the red by £4.6bn in what was its largest ever loss, and one of the biggest in UK corporate history, after being hit by the pound’s plunge and a corruption scandal.

On an underlying basis, Rolls-Royce saw annual pre-tax profits rise 25 per cent to £1.1bn in 2017.

Chief executive Warren East said the company had made “good progress in 2017”.

He said it was too early to say how many jobs will be affected under the restructure, but confirmed the shake-up will lead to a slimmed down corporate centre and will cut out duplication in its support and management functions.

The latest restructure comes as around 600 managers have left the group since 2015 under a previous overhaul.

But Mr East stressed the revamp was not set to affect engineers, with plans to invest £1.4bn in research and development and to hire engineers and technology experts.

He said: “The business unit simplification and restructuring programme that we announced this January will drive further rationalisation and is a fundamental step in the journey started two years ago to bring Rolls-Royce closer to its full potential both operationally and financially.”

The engine maker plans to update people on the overhaul in the middle of the year.

Rolls-Royce said this year’s results would be hit by costs relating to repairs on some of its engines.

The company revealed a hit of around £340m in 2018 for the cost of repairs on existing engines, following a £170m charge in 2017, with around another £240m due in 2019 to cover the issue.

Up to 500 Trent 1000 engines – used on Boeing 787 planes – and some Trent 900 engines are affected by the issues, which see components wear out earlier than expected.

Rolls-Royce said underlying operating profits are expected at around £400m for 2018 but could fall to £300m at the lower end of forecasts, which would be a drop from £321m reported for 2017.

Despite the warning, Rolls-Royce shares rose more than 8 per cent after the results.

PA