28th Feb 2019 08:35
LONDON (Alliance News) - Rolls-Royce Holdings PLC said on Thursday it sunk substantially to a loss for 2018 due to higher costs, in spite of revenue growth for the year.
Also on Thursday, the defence and aerospace company said it is withdrawing from the competition to power aircraft manufacturer Boeing Co's proposed new midsize airplace platform.
Rolls-Royce said it would be unable to commit to the proposed timetable to ensure it would have a mature enough product to support the new aircraft.
"This is the right decision for Rolls-Royce and the best approach for Boeing. Delivering on our promises to customers is vital to us and we do not want to promise to support Boeing's new platform if we do not have every confidence that we can deliver to their schedule," said Chris Cholerton, president of Civil Aerospace.
Shares in Rolls-Royce were down 4.7% at 936.40 pence on Thursday, the worst performer in the FTSE 100 index.
The defence and aerospace company said its pretax loss for the year was GBP2.94 billion, sinking from a profit of GBP3.89 billion the year before, despite revenue rising by 6.7% to GBP15.73 billion from GBP14.74 billion.
During the period, the cost of sales rose to GBP14.53 billion from GBP12.33 billion, leading to a halving of gross profit to GBP1.20 billion from GBP2.42 billion.
On an underlying basis, pretax profit more than doubled to GBP483 million from GBP211 million, as underlying revenue grew by 12% to GBP14.37 billion from GBP12.79 billion in 2017.
During the year, the group reported an exceptional charge of GBP790 million from its Trent 1000 turbofan engine line.
For the Trent 900, there was an exceptional charge of GBP186 million for the year, following the decision by Airbus SE to close the production line of its A380 aircraft.
Rolls-Royce's 2017 results were restated as a result of adopting the IFRS 15 accounting standard from IFRS 9 previously.
The FTSE 100-listed company issues non-cumulative redeemable preference shares as an alternative to paying a cash dividend, for 2018 this will be equivalent to an annual payout for 11.7 pence per share, in line with the year before.
Looking ahead, Rolls-Royce expects to see 10% growth in underlying revenue for its Civil Aerospace and ITP Aero divisions for 2019, while Power Systems will see mid single-digit growth and Defence will remain stable.
"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," said Chief Executive Warren East.
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