Rolls-Royce signals major shake up after operational review

The FTSE 100 aerospace and engineering firm released an outline of its intentions on Tuesday ahead of a full presentation later in the day that will show how it plans to save between £150m and £200m per year from 2017.

It said the restructure will “simplify the organisation, streamline senior management, reduce fixed costs and add greater pace and accountability to decision making”.

There are also proposals to increase revenue segmentation, business by business gross margin and trading cash flow analysis.

It also signalled a number of areas for improvement, including the complex business model with high embedded costs, and prior disclosure that had undermined confidence in the business.

East, who took up the role in early July, said the company is going through an unprecedented period of change.

“These changes, while more painful than we expected in the near-term, are vital to our long-term success.

East is convinced the company’s long-term outlook is positive, with his review highlighting a number of areas where processes can be simplified and accelerated, and operational gearing and operational effectiveness can be improved.

The results of the review come just a day after the company announced it had spent $206.5m (£136m) to restructure its jointly owned approved maintenance centres (AMCs) responsible for maintenance, repair and overhaul work on its Trent engines.

It also warned less than a fortnight ago that earnings for the year will be at the low end of guidance as it downgraded its expectations for next year and warned of a possible cut to the dividend.