Rolls-Royce continues Marine transformation

RNS Number : 6891Q

Rolls-Royce Holdings plc

01 December 2016

1 December 2016

Rolls-Royce ACCELERATES TRANSFORMATION OF MARINE BUSINESS THROUGH FURTHER RESTRUCTURING AND SIMPLIFICATION

Rolls-Royce has today announced plans to accelerate the transformation of its Marine business as a result of continuing weakness in the maritime market. Rolls-Royce's Marine business supplies a range of technology and services to customers operating merchant, offshore and naval vessels.

Planned measures include a further simplification of the structure of the business, with a streamlining of the senior management team, and a series of cost reduction initiatives which will result in the loss of around 800 roles worldwide and an estimated £45-50 million of annualised savings from mid-2017. Costs of this restructuring are expected to be around £20 million, split between 2016 and 2017.

As part of the programme, investments are also being proposed to establish an R&D centre for the development of new propulsion products, and an expanded Services hub for Northern Europe, both in Ulsteinvik, Norway. The organisational changes will also increase the strategic focus on developing further electrical and digital technologies as the maritime industry shifts towards a more digital future where Ship Intelligence plays a greater role.

Today's proposals follow a series of cost reduction initiatives carried out over the past three years to improve the affordability and competitiveness of the Marine business. The proposed job reductions are in addition to the reduction of 1,000 employees announced in May and October last year. The Marine business currently employs around 4,800 people in 34 countries.

In the trading update on 16 November, we highlighted that there were no signs of a recovery in offshore oil & gas markets and orders for new equipment remain very weak, resulting in expectations of further revenue weakness for the business in 2017. Service revenues have also been impacted by lower utilisation of vessels.

Mikael Makinen, Rolls-Royce, President - Marine, said: "The ongoing market weakness that has followed the dramatic fall in the price of oil continues to have an adverse impact upon our order book and profitability. We have made significant progress in transforming Marine into a far more agile and simplified business than we were and we have to take further steps to address our cost base.

"Reducing our workforce is never an easy decision, but we have no option but to take further action beyond the changes we have made to date. This remains a fundamentally strong business, but we need to overcome the immediate challenges and focus our investments on the technologies that will shape our future growth."

Warren East, CEO of Rolls-Royce added: "I am very supportive of Mikael and his team's proactive efforts to optimise our Marine business in extremely challenging market conditions and at the same time to target investment on future opportunities. The actions being taken will enhance the competitive strength and resilience of the business in what remains an attractive market for Rolls-Royce."

About Rolls-Royce Holdings plc

1. Rolls-Royce's vision is to be the market-leader in high performance power systems where our engineering expertise, global reach and deep industry knowledge deliver outstanding customer relationships and solutions. We operate across five businesses: Civil Aerospace, Defence Aerospace, Marine, Nuclear and Power Systems.

2. Rolls-Royce has customers in more than 150 countries, comprising more than 400 airlines and leasing customers, 160 armed forces, 4,000 marine customers including 70 navies, and more than 5,000 power and nuclear customers.

3. We have three common themes across all our businesses:

· Investing in and developing engineering excellence

· Driving a manufacturing and supply chain transformation which will embed operational excellence in lean, lower-cost facilities and processes

· Leveraging our installed base, product knowledge and engineering capabilities to provide customers with outstanding service through which we can capture aftermarket value long into the future.

4. Annual underlying revenue was £13.4 billion in 2015, around half of which came from the provision of aftermarket services. The firm and announced order book stood at £79.5 billion at the end of June 2016.

5. In 2015, Rolls-Royce invested £1.2 billion on research and development. We also support a global network of 31 University Technology Centres, which position Rolls-Royce engineers at the forefront of scientific research.

6. Rolls-Royce employs over 50,000 people in more than 46 countries. More than 16,000 of these are engineers.

7. The Group has a strong commitment to apprentice and graduate recruitment and to further developing employee skills. In 2015 we employed 228 graduates and 277 apprentices through our worldwide training programmes.

For further information, please contact:

Investors:

John Dawson

Director of Investor Relations

Rolls-Royce plc

Tel: +44 (0)20 7227 9237

M: +44 7557 287101

jcdawson@rolls-royce.com

Media:

Richard Wray

Director of External Communications

Rolls-Royce plc