7th Mar 2018 13:16
Shares in Rolls-Royce were up 12.8% at
The defence and aerospace company swung to a pretax profit of
The loss in 2016 was largely driven by a
Underlying pretax profit for 2017 rose 25% on an organic basis to
Among divisions, Civil Aerospace saw underlying revenue rise 12% organically, Defence Aerospace declined 1%, Power systems rose 3%, Marine declined 9% and Nuclear rose 4%.
Growth in Civil Aerospace was driven by a 35% increase in large engine delivery volumes and a 12% increase in invoiced flying hours.
However, Rolls-Royce also said it saw "significant" in-service engine issues on turbofan engines Trent 1000 and Trent 900. principally due to lower than expected durability of certain turbine and compressor rotor blade parts. The company said it took a
The Power Systems unit was boosted by good demand from
The decline in Marine revenue represented ongoing offshore market weakness, though the company highlighted that its underlying operating loss of
Nuclear revenue rose due to greater submarine activity, though underlying operating profit fell 18% due to increased research & development spend on Small Modular Reactors.
For 2017, the final payment to shareholders was held at 7.1p, giving a full year payment of 11.7p.
Looking ahead to 2018, Rolls-Royce said it sees high single-digit underlying revenue growth for its Civil Aerospace and Power systems unit on an IFRS 15 basis, with Defence stable, resulting in mid single-digit growth across the group.
Rolls-Royce said it has adopted the IFRS 15 accounting standard since the start of 2018.
Civil Aerospace revenue growth in 2018 is set to come from higher original equipment delivery volumes and services activity, though the company also noted there will be higher Trent 1000 and Trent 900 in-service costs.
Power Systems in 2018 is set to benefit from the continued recovery of naval, oil & gas, and construction & agriculture end markets, with product mix towards "lower margin" mining and construction & agricultural products.
Underlying operating profit for 2018 is seen at around
"Rolls-Royce made good progress in 2017. Financial results were ahead of our expectations and we achieved a number of important operational and technological milestones, but were impacted by the increasing cost and challenge of managing significant in-service engine issues," said Chief Executive Warren East.
The company said it continues to focus on its operational restructuring, and is proposing to move to a "considerably simplified" staff structure. The restructuring programme is expected to deliver a "significant reduction" in costs, Rolls-Royce said.
The restructuring, first announced in January this year, includes a reduction from five business units to "three tightly focused" operating businesses based around Civil Aerospace, Defence and Power Systems.
Rolls-Royce said it will give further details on the expected nature, financial benefits and exceptional restructuring costs of the simplification and restructuring programme at a capital markets event in June.
Efficiencies from the 2015 transformation programme achieved run-rate cost savings at the top end of the group's initial expectations of
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