Rolls-Royce hails ‘breakthrough year’ despite swinging to £2.9bn loss

Company is axeing 4,600 jobs as part of a cost-cutting drive and has suffered from a series of technical issues with its engines

(PA)

Rolls-Royce hailed a “breakthrough year” despite suffering a £2.9bn loss last year partly thanks to technical problems with its engines.

The British aerospace and defence firm cheered 71 per cent growth in underlying earnings to £633m, up from £317m reported the previous year.

Technical issues with its Trent 1000 engines cost £790m in 2018, helping to drag Rolls-Royce to a statutory loss of £2.9bn against profits of £3.9bn in the previous year.

The company has slashed its workforce by around 1,300 as part of a £400m cost-cutting drive, with 4,600 staff to be lost in total by 2021.

Last year the firm warned over costs linked to the discovery of technical issues with Trent 1000 engines.

Large numbers of Trent 1000-powered aircraft have been grounded, generating a significant repair bill, and the group has dropped out of the bidding to supply engines for Boeing’s new midsize planes.

Chief executive Warren East said: “Despite the challenges we faced on Trent 1000 in-service issues, solid progress has been made realising our ambition to make 2018 a breakthrough year, both strategically and financially.

“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.”

George Salmon, equity analyst at Hargreaves Lansdown, said their were some bright spots for Rolls such as £611m of net cash.

“But there are asterisks attached to the progress,” he said. “While Rolls deserves credit for freeing up cash by changing its supplier terms, much of the improvement is being driven by extra upfront payments and £70m of restructuring costs have been excluded.

“While these results look strong, the multitude of adjustments and mitigating factors mean we think the champagne will have to stay on ice for now.”