Rolls-Royce takes hit from engine issue

Rolls-Royce takes hit from engine issue

But the company said it remained on track to meet its goal of generating free cash flow of 1 billion pounds by around 2020.

Rolls boss Warren East said it was too early to say how many jobs will be affected, but confirmed the shake-up will see it cut out duplicate roles in its support and management functions.

Underlying pretax profit for 2017 rose 25% on an organic basis to GBP1.07 billion and underlying revenue rose 6% to GBP15.09 billion.

"The reality is there is more simplification that we need to do to make ourselves truly competitive and fit for the future", East told reporters on Wednesday. The restructuring programme is expected to deliver a "significant reduction" in costs, Rolls-Royce said. Some 600 senior managers left the company after the initial restructuring.

Growth in Civil Aerospace was driven by a 35% increase in large engine delivery volumes and a 12% increase in invoiced flying hours.

"We're seeing this as an encouraging set of results", East said.

Shares in Rolls-Royce were up 12.8% at 935.00 pence on Wednesday afternoon.

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.

Shares of Rolls-Royce Holding PLC (LON:RR) have been assigned a consensus recommendation of "Hold" from the twelve research firms that are presently covering the firm, Marketbeat Ratings reports.


"2018 will be one of significant operational progress", East continued.

Mr East said: "We are being transparent with our customers, we're being transparent with the market. We have our arms around the solution".

Andy Chambers, analyst at Edison Investment Research said: "Charges relating to turbine blade performance issues in the Trent 1000 engines for the B787 and the T900 engines on the A380 totalled £227m with a £170m cash impact that will double in the current year as the retrofit of redesigned components peaks".

Air New Zealand, British Airways, Virgin Atlantic and Japan's ANA Holdings are amongst those affected.

The decline in Marine revenue represented ongoing offshore market weakness, though the company highlighted that its underlying operating loss of GBP25 million for the division was "reduced through strong focus on cost control", compared to a GBP27 million loss in 2016.

The guidance uses the new accounting standard IFRS, which changes the way the earnings are booked on long-term contracts.

Another part of East's turnaround plan is the potential sale of the Rolls-Royce's loss-making commercial marine business, the part of the business which designs and makes equipment used in oil and gas extraction.

FURTHER STREAMLINING: Financial services company Hargreaves Lansdown expected news on further efforts to restructure the business, and weren't disappointed.

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