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Rolls-Royce signals further job cuts as it swings back to profit

Shares in the FTSE 100 giant rose sharply on the better than expected results, following a record loss in 2016.

Rolls-Royce logo at its aerospace engineering and development site in Bristol
Image: Rolls-Royce says it is looking to create a 'considerably simplified staff structure'
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Engine maker Rolls-Royce has signalled a fresh round of job cuts as it swung back into profit after slumping into the red a year ago.

Shares powered 12% higher on the better than expected results but there was more uncertainty for employees as the group said it planned to move to a "considerably simplified staff structure".

The FTSE 100 group reported a pre-tax profit of £4.9bn – partly helped by a big accounting boost thanks to the recovery in the value of the pound.

It follows a record £4.6bn loss in 2016 when it was buffeted by sterling's collapse after the Brexit vote and a costly corruption scandal settlement.

But even stripping out one-off measures, 2017 profits were still 25% higher at £1.07bn.

Chief executive Warren East said the business had made good progress over the year, adding that a recently announced shake-up would "facilitate a more fundamental restructuring" creating a "much leaner corporate centre".

He said it was too early to say how many jobs would be affected. Further details are expected to be set out in June.

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Rolls-Royce has already seen around 600 managers leave since 2015 under a previous cost-cutting programme.

The new cuts are intended to cut out duplication in support and management and will not affect engineers - with Rolls planning to invest £1.4bn in research and development.

The group's strong performance in 2017 was driven by an increase in engine deliveries and maintenance volumes plus higher sales in its power systems businesses, which makes engines for use in trains, agriculture and mining.

But it also pencilled in a £340m hit for this year to cover the cost of carrying out repairs on existing engines, primarily the Trent 1000 installed on Boeing 787s.

Air New Zealand, British Airways and Virgin Atlantic were among those affected.