Rolls reshuffle boosts shares

ROLLS-ROYCE shares jumped 5pc yesterday after the aero engine-maker axed a layer of senior management as new-broom boss Warren East tries to turn around a company rocked by five profit warnings in two years.

The move, a first step in a restructuring programme, will simplify Rolls’ management and decision-making and cut costs by £150-200m a year.

The heads of five business units – civil aero-engines, defence, nuclear, marine and power systems – will all report to East. This sees the elimination of three management units.

As a result, a 15-year company veteran Tony Wood, head of the aerospace division, and Lawrie Haynes, head of the land and sea unit, are leaving the FTSE 100 group. Both will remain in post into next year to help with the transition.

‘The changes we are announcing are the first important steps in driving operational excellence and returning Rolls-Royce to its long-term trend of profitable growth,’ East said.

Rolls has been under increasing pressure over its flagging performance and US activist hedge fund ValueAct has built up a 10pc stake in the business.

It is demanding a seat on the board and wants a wider shake-up of the business.

East, who is the former boss of technology group Arm Holdings, was brought in to replace John Rishton with a remit to revamp the Derby-based business, which was founded in 1884.

Analysts at Kepler Cheuvreux said the changes ‘are a clear start to restructuring efforts and therefore slightly positive’.

Rolls closed 26.5p higher at 566.5p. Shares have almost halved in the past year.