Proactive Investors - Rolls-Royce Holdings PLC (LON:RR.) shares firmed 1.1% as new boss Tufan Erginbilgic continued to express his ambitions to drive the company forward despite having a further dig at past mismanagement.
The new CEO, who in January shocked staff and investors by referring to Rolls-Royce as a “burning platform”, was scathing about how its power-systems division had been run.
In an interview with the Financial Times, he claimed the division had been “grossly mismanaged” in recent years, pointing out that margins at the subsidiary, which makes diesel and gas engines for ships and trains, had fallen in 2022 even though revenues had risen.
Costs had not been kept under control. “That’s mismanagement,” he said.
The business, Erginbilgic added, “needs to have a clear strategy and it needs to be managed properly but it has lots of potential”.
An overhaul of management at the unit is already under way.
Erginbilgic has also shaken up senior management, including the heads of its civil and defence businesses, and beefed up his senior management team bringing in executives from BP (LON:BP), his previous employer.
A transformation programme has identified seven areas of improvement, including reducing the company’s working capital and increasing efficiency. It is also looking at synergies across the group, including opportunities to centralise key functions.
Erginbilgic said the company’s operating leverage that he inherited — or “how much of your gross margin is absorbed by cash costs” — was the “worst I have seen in my career”.
While the restructuring done by his predecessor Warren East during the pandemic had been the “right thing to do” to stem the outflow of cash, his only criticism is “that they didn’t do it across the group”.
There was a “deep engineering capability” within Rolls-Royce, he added, but employees “have not been led the right way”.
A stronger Rolls-Royce would benefit all stakeholders, he insisted, including customers.
“I want Rolls-Royce to stand on its own and create a company in this country that no one needs to worry about”.