Rolls-Royce reports half year results

Eleanor Steed
By Eleanor Steed August 6, 2018 16:17

Rolls-Royce reports half year results

Rolls-Royce has posted group underlying revenue up 14% to £7.04bn and reported revenue up 12% to £7.5bn. The reported loss before tax was £1,262 million, a significant decrease compared to the 2017 half year profit before tax of £1,444 million. Civil Aerospace revenues rose 26% to £3.6bn with an underlying operating loss of £112 million. Rolls-Royce states that revenue growth was driven by a 24% increase in sales volumes of installed engines and spare engines, including to joint ventures, and increased services activity. The underlying operation loss reflects strong aftermarket trading including increased spare parts sales, higher OE spare engine volumes and increased net R&D capitalisation of £174m, offsetting £(154)m of contract accounting adjustments, according to the report.

For the six months period, the results include an exceptional charge in the income statement for Trent 1000 in-service issues of £554 million. Full year 2018 cash costs for the Trent 100 and 900 issues are estimated to be £450 million, in line with 15 June 2018 guidance.

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.”

East also highlighted the continuing efforts of the company to minimise the disruption caused to customers by the Trent 1000 and 900 in-service issues.

“We have significantly increased our Trent 1000 maintenance and overhaul capacity, sought ways to reduce engine shop visit turnaround times and have added approximately 50% more turbine blade capacity since the start of the year,” he said. “We recently confirmed that we have now started certification testing of a redesigned intermediate compressor rotor blade for Trent 1000 Package C engines, with a redesign for Trent 1000 Package B engines to follow. In addition, as a precautionary measure, we have launched and, are in the process of testing, a redesign of the blade common to the Trent 1000 TEN and Trent 7000 engines. We continue to make good progress in addressing the other known issues affecting Trent 1000 engines.”

Rolls-Royce predicts the combined cash cost of both the Trent 1000 and Trent 900 in-service issues to be at a similar level in 2019 to the approximately £450m the company expects in 2018, before declining by at least £100m in 2020.

The company also declares that the civil aerospace cash deficit per engine has reduced by 15% from 2017 full year average – one of the key goals for the division is reducing this deficit even further.

See previous posts:
Trent 1000 Package C compressor issues discovered on Package B engine types
Rolls-Royce issues a Trent 1000 update; DAE sells aircraft portfolio
Also see Airline Economics Aero Engine Yearbook 2018 – Trent 1000/900.

Eleanor Steed
By Eleanor Steed August 6, 2018 16:17