Rolls-Royce swings to £2.9bn loss

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Engineering giant Rolls-Royce swung into loss in the year to 31 December 2018, as it increased the charge for fixing problems with its Trent 1000 engines.

It also said because Airbus was scrapping the A380 aircraft, it had recorded an exceptional item of £186m.

The company made a pre-tax loss of £2.9bn, down from a pre-tax profit of £3.89bn the previous year.

Rolls-Royce shares were the biggest losers on the FTSE 100 – down 4%.

Underlying operating profit, which strips out the exceptional items, jumped 71% to £633m for 2018, up from £317m in the previous year.

“Underlying financial results are ahead of expectations, with good growth in profit and cash flow. Following the restructuring we announced in June last year we are starting to see the crucial behavioural changes needed to sustain our momentum,” chief executive Warren East said.

Last summer the company announced it was cutting 4,600 jobs over the next two years as part of a major reorganisation.

Last year, a fault with the Trent 1000 engines grounded planes at British Airways and other airlines.

At the time Rolls-Royce said the issues would take “some years” to fix. It said parts in its Trent 1000 engines were wearing out faster than expected but that it “had a solution” to the problem.

In its most recent set of results it said it had increased the charge it had taken on fixing problems with its Trent 1000 engines to £790m, up from £554m.

It also said that following the Airbus decision to stop delivery of the A380 in 2021 it had assessed the impact on its Trent 900 engine programme and associated customers and suppliers.

As a result it had recorded an exceptional item of £186m in the 2018 results which “relates to onerous contracts, tooling write-offs and the acceleration of depreciation and amortisation on associated Trent 900 programme assets”.

The company is refocusing its business on civil aerospace, defence and power systems.

However, it has said it will no longer compete to supply engines for Boeing’s proposed new mid-sized jetliner to fill a gap between the narrow and wide-body aircraft.

“We are unable to commit to the proposed timetable to ensure we have a sufficiently mature product which supports Boeing’s ambition for the aircraft,” Rolls-Royce said.