Rolls-Royce targets £500m in savings and may sell electric plane division

Engine-maker Rolls-Royce has set out an ambitious new plan to boost its profits which includes an aim of cutting costs by up to £500 million.

The business is also proposing to sell the part of its business which is developing electric planes as it doubles down on its other units.

The company said it wants to deliver operating profits of between £2.5 billion and £2.8 billion by around 2027, a major increase from the £837 million it made last year.

But to do so will require costs to be scaled back, it said.

Rolls-Royce, which said last month that it will cut up to 2,500 jobs, wants to make savings of around £400 million-£500 million by 2027.

Most of that will come from the business’s core civil aerospace division, where it plans to increase the margins in its service agreements for engines.

That means increasing the time that an engine is on the plane, reducing the costs of both visits to the workshop and of products, among other things, it said.

It wants margins at the civil aerospace division to increase from 2.5% last year to 15%-17% later this decade.

The company said it will also try to raise around £1 billion to £1.5 billion through selling parts of the business over the next five years.

Rolls-Royce Electrical, which is developing electric aircraft, is one of those slated for sale.

Chief executive Tufan Erginbilgic said: “Rolls-Royce is at a pivotal point in its history. After a strong start to our transformation programme, we are today laying out a clear vision for the journey we need to take and the areas where we must focus.

“We are setting compelling and achievable financial targets for the mid-term which will take Rolls-Royce significantly beyond any previous financial performance.

“This will benefit not just our shareholders but our people, customers and partners.

“We are building ‘one Rolls-Royce’ – a company that can fully realise its potential, ensuring the excellence and innovation that helped shape the modern world endures long into the future.”