Rolls Royce's finance chief buys into restructuring story

Rolls Royce’s finance chief, David Smith, added to his position in the company’s share price on the same day that management told shareholders overall trading in the first few months of the year had been in-line with expectations.

On 5 May, Smith, who joined the firm at the start of 2014, purchased 6,504 shares at the then market price of 614.95p, taking his total holdings in the maker of aero-engines and power systems to 35,469.

Speaking at the aerospace engineer’s annual general shareholders’ meeting that same day, boss Warren East also told investors the firm’s outlook for the year as a whole was unchanged.

However, he neither alluded nor confirmed press speculation that the outfit might boost its target for cost savings, although the firm still expected to deliver between £30m-£50m in savings in 2016.

On 27 April, the Financial Times had reported East had challenged management to identify larger cost cuts after an internal study revealed the London-based company would be able to earn £1bn in additional profits if it could match the margins of its American rival General Electric.

According to the FT, an internal team at the company had told some managers that the 2017 target for cost savings of £150m could be increased to £400m.

That prompted analysts at JP Morgan to tell clients the next day that: “Over the last four to five months, RR’s CEO Warren East (since July 2015) has implemented a number of initiatives that should help RR to improve its profitability. The journey will be long and there are many challenges to overcome, but we believe all the actions being taken are the right ones.

As of 16:55 BST stock in Rolls Royce was up by 2.70% to 647p, about 5% below its 200-day moving average.