Shares in Rolls-Royce Holdings (LON:RR) have advanced in London in today’s session, with investors reacting positively to the engine maker’s latest update on its restructuring programme. The company, which has been plagued by past profit warnings and ongoing problems with its Trent 1000 engines, unveiled plans to axe 4,600 jobs over the next two years as it looks to step up cost savings.
As of 08:12 BST, Rolls-Royce’s share price had added 2.73 percent to 851.20p. The stock is outperforming the broader UK market, with the benchmark FTSE 100 index having fallen into the red and currently standing 0.51 percent lower at 7,664.27 points.
Rolls-Royce updates on restructuring
Rolls-Royce announced in a statement this morning that it was continuing with its restructuring, targeting run-rate net cost savings of £400 million a year by end of 2020. The British engine maker expects the next phase of its transformation to result in the reduction of around 4,600 roles, predominantly in the UK over the next 24 months.
“We have made progress in improving our day-to-day operations and strengthening our leadership, and are now turning to reduce the complexity that often slows us down and leads to duplication of effort,” the group’s chief executive Warren East pointed out. “It is never an easy decision to reduce our workforce, but we must create a commercial organisation that is as world-leading as our technologies.”
Analysts weigh in on group’s latest plans
Jefferies analyst Sandy Morris told Reuters that while the market would not be surprised by the job cuts as East had hinted there was more restructuring to come, the timing was not ideal.
“Against the backdrop of costly Trent 1000 in-service issues and rising civil engine deliveries, we can see how it might stir a debate about whether the timing of this fundamental restructuring increases near-term risk,” the analyst pointed out.