Rolls-Royce shares soar as Airbus fears eased

Rolls-Royce shares surged to the top of the FTSE 100 leader board yesterday as the company said it expected limited impact on profits from the fault in its Trent 900 aircraft engine that saw airlines across the world grounding Airbus jets that use it, and that the problem would be fixed.

Some £1.3bn had been wiped from the company's market value as it found itself at the heart of a crisis following the emergency landing in Singapore of a Qantas A380 after part of its engine disintegrated mid-flight.

However, Rolls-Royce managed to instill some calm in its skittish investors yesterday with a trading statement in which its famously publicity shy chief executive, Sir John Rose, said: "This event and the consequent actions will have an impact on the group's financial performance this year.

"However the scale of our order book, the breadth and mix of our portfolio, the global nature of our business and our strong balance sheet makes Rolls-Royce a resilient business, and we expect continued underlying profit growth in 2010." That, and the fact that the group provided details on the problem and on efforts to fix it, sent the shares sharply higher in London trading.

They finished up 27p at 611p, making Rolls-Royce comfortably the biggest riser in percentage terms on the FTSE 100. Tina Cook, an analyst at Charles Stanley, said the announcement provided "welcome clarity". She noted the disparity between the amount wiped from the value of the company and the likely hit to profits, which she put at about £25m, given the company's guidance of growth "slightly lower" than the 4 to 5 per cent it had previously expected. However, she added: "The market has reacted positively, but a modicum of caution is still warranted as the investigation and remedial work is still ongoing."

On this front Rolls-Royce said the problem was specific to the Trent 900. and that the failure was confined to a specific component in the turbine area of the engine. This, said Rolls-Royce, "caused an oil fire which led to the release of the intermediate pressure turbine disc".

The company said it would replace the "relevant module" according to an agreed programme and would continue to work closely with investigating authorities. It said the programme would "enable our customers progressively to bring the whole fleet back into service".

However, the ripples from the incident continued to flow through the industry yesterday as Airbus' parent, EADS, said investigations into the Rolls-Royce engine blowout could delay deliveries of A380s in 2011 as it focused on maintaining the existing fleet.

The Airbus chief executive, Tom Enders, said: "The customer has priority, and the priority is to keep the 39 aircraft flying or back in the air as quickly as possible and I would not rule out some impact on the delivery schedule."

Qantas's six Airbus A380s have been grounded since last Thursday in the biggest incident to date for the world's largest passenger jet.

Gary Davies, professor of corporate reputation at the Manchester Business School, said the most important thing for Rolls-Royce now was to fix the problem to prevent it from contaminating its brand and hitting other parts of the business. "When there is spillover it can be quite severe," he said. "You just need to look at what happened to Jarvis after the Potters Bar rail crash in 2002. All its operations were associated with it. The key now is to get the problem fixed as quickly as possible and for the most senior person to take responsibility for that."

Elsewhere Rolls-Royce said trading across its businesses had progressed "in line with the guidance for modest growth provided in July 2010".

The company said its non-civil aerospace businesses were likely to perform "slightly better than guided" in July and that there were "signs of improving demand in our marine business". It said the growth of its defence business overseas would compensate for the impact of cutbacks expected in the UK.

PROMOTED VIDEO
News
people
News
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Sport
Javier Mascherano of Argentina tackles Arjen Robben of the Netherlands as he attempts a shot
world cup 2014
Arts and Entertainment
The successful ITV drama Broadchurch starring David Tenant and Olivia Coleman came to an end tonight
tv
Sport
Four ski officials in Slovenia have been suspended following allegations of results rigging
sportFour Slovenian officials suspended after allegations they helped violinist get slalom place
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Programme Support, Coms, Bristol, £300-350p/d

£300 - £350 per day + competitive: Orgtel: My client, a leading bank, is curre...

(Junior) IT Systems Administrator / Infrastructure Analyst

£28000 - £32000 per annum + pension, 25 days holiday: Ashdown Group: A highly ...

Finance Officer

Negotiable: Randstad Education Birmingham: Randstad Education are seeking a Fi...

Accounts Payable

£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice