£554m charge for Rolls-Royce after Trent 1000 engine problems

Continuing problems with Rolls-Royce’s Trent 1000 engines has left the company with an operating loss of £775m.

The company has reported, in its half year results, that it has been hit by a charge of £554m “for Trent 1000 in-service issues.” Despite this Rolls-Royce has seen healthy growth, with a profit of £141m and group revenue up 14% to over £7bn.

Commenting on the results, Warren East, Chief Executive, said: “We continued to make good progress in the first half. Financial results were ahead of our expectations with strong growth from Civil Aerospace and Power Systems and we achieved a number of operational and technological milestones.

“Reflecting our progress to date and growing confidence for the full year, we now expect both underlying profit and cash flow for 2018 to be in the upper half of our guidance range. We continue to be impacted by the challenge of managing significant Trent 1000 in-service issues and have recognised an exceptional charge of £554m, representing the profit impact of that part of the total current and estimated costs out to 2022 that is considered to be abnormal in nature.

“Rolls-Royce is at a pivotal moment in its history. After a long period of significant investment and innovation, we are poised to become the world-leader in large aircraft engines. Now we need to deliver the fundamental changes that will enable us to realise the potential of our position, delivering improved returns while continuing to invest in the innovation needed to realise our long-term aspiration to be the world’s leading industrial technology company.

“Our new business structure and drive for greater pace and simplicity, combined with our growing installed base, means we are well placed to exceed free cash flow of £1bn by 2020 and push towards our mid-term ambition for free cash flow per share to exceed £1.

“This is the time for execution. In Civil Aerospace our installed widebody fleet will continue to grow and we will strive to further reduce cash deficits on engine sales, whilst working hard to minimise the disruption caused to our customers by in-service issues. The benefits of creating a single Defence operation with greater scale and the ability to offer customers a broader range of products and services, should present us with new opportunities.

“In Power Systems the continued expansion of our end markets is driving strong volume and this, combined with the further product portfolio rationalisation and the development of new service offerings, gives us confidence for the full year.”