The chief executive of Rolls-Royce has said the power systems engineering group is studying the implications of Britain voting to leave the European Union in a signal that leading businesses are increasingly concerned that Brexit is a real possibility.

Rolls employs more than 20,000 people in Britain and invests hundreds of millions of pound into research and development, making it a vital cog in the government’s industrial strategy.

Warren East, chief executive, said he “absolutely believes” it is in the interests of the UK, Rolls, and its suppliers for the company to remain in the EU.

However, when asked whether Brexit would lead to Rolls reconsidering its investments in the UK, he said: “We are looking at the implications should the vote go one way and should we come to Brexit, but we are in favour of staying in the EU.”

East was speaking on Friday as Rolls announced its full-year results and cut its dividend for the first time for 24 years.



However, shares in the company surged by 14%, closing at 606p, as investors breathed a sigh of relief that Rolls had not issued its sixth profit warning in two years and took heart at comments from East that he is making progress with his turnaround plan.

Rolls makes engines for the Airbus A380 superjumbo, the Eurofighter Typhoon jet, and the Boeing 787 Dreamliner. It also builds the nuclear-powered propulsion system for Britain’s submarines and parts for ships.

However, the company has been hurt by cuts to defence spending by western governments, a fall in demand for corporate jets, and a slump in the oil price, which has meant Rolls’ customers in the energy industry are investing less.

In response, East is trying to cut up to £200m of costs a year and has removed 25% of the company’s 200 senior managers. Rolls was already cutting 3,600 jobs across the business.

The Rolls boss said he was “pretty pleased” with the progress at the company since he took charge last summer. “We have taken out a whole cycle of reviewing the business so if an incident happens then it appears pretty immediately with the leadership team, rather than going into a division and languishing there for a week or a month.”

Rolls cut the final dividend payment to investors by 50%, to 7.1p a share. The last time it lowered the payment was 1992.

“It needed to be a meaningful amount to make it worthwhile doing, but it is a sign of the confidence in the business [that a dividend is still being paid],” East said.

“We need to invest in our transformation programmes that we are working on, that is why we need to do it. We are looking to restore it to a healthy level at the appropriate time.”

Sandy Morris, analyst at Jefferies, Rolls’ house broker, said the dividend cut was a “painful step”. However, he added: “We remain optimistic 2016 will show momentum is building, the hurdles are being overcome and, to be blunt, that Rolls-Royce management has control and is growing in confidence.”

Rolls reported a 12% fall in underlying pre-tax profits to £1.43bn in 2015. Profits excluding one-off items were £1.36bn, in line with the bottom end of the company’s forecasts.

Analysts are expecting 2016 to be even more difficult for Rolls, with profits forecast to halve. The company is suffering as Airbus and Boeing transition to new aircraft, meaning demand is waning for some of Rolls’ most successful engines, such as the Trent 700.

However, Rolls is confident of increasing its share of the civil aerospace market and highlighted growth of 4% in its order book as it rolls out new aircraft engines such as the Trent XWB, 1000 and 7000.

Rolls is still mired in a Serious Fraud Office investigation about bribery allegations in China, Indonesia and other parts of the world. The company said in the results that it is “continuing to cooperate with the authorities in the UK, US and elsewhere”. Rolls added: “As the investigations are still ongoing we are unable to give any further details or a timescale for when they will conclude.”

The company has also held talks with ValueAct, the Californian activist investor, which has built up a 10% stake and is pushing for a seat on the board. East said the board is yet to make a decision about whether to hand ValueAct a seat. ValueAct declined to comment on Rolls’ results.