Faulty engines to dent annual profits at Rolls-Royce

Rolls-Royce has cut its profit guidance for the year as it continued to be plagued by problems with its troubled Trent 1000 engines.

The engineering giant said it expects profits for the full year to be at the lower end of forecasts after a rise in costs related to faulty blades on the Trent engine.

In a trading update, it also pushed back its predicted final repair date for the engines to 2021 as it continues testing on the blades.

Rolls-Royce has faced a series of challenges over its Trent 1000 engines, with one failing over Italy, raining down metal on a local town just minutes after take-off.

The FTSE 100 firm said profits would be dented by the problems, as the cost of repairing the faulty blades would result in a £1.4 billion hit to operating profit in 2019.

The Trent engine problems are expected to have resulted in £2.4 billion in costs from 2017 to 2023, it added.

It said the major costs relate to “customer disruption and remediation shop visits” and provisions against possible future losses on contracts.

The company said it has accelerated its investment into additional maintenance capacity and spare engines to reduce disruption to its customers.

Warren East, chief executive at Rolls-Royce, said: “In spite of improved trading since the half year, we now expect full year operating profit and free cash flow to be towards the lower end of our guidance ranges.

“In civil aerospace, while the Trent 1000 costs remain a headwind, the vast majority of our installed fleet of widebody engines is performing well, with the Trent XWB surpassing our expectations.

“We expect to deliver at least £1 billion of free cash flow in 2020, underpinned by the benefits of our restructuring programme, operating efficiency improvements, further efforts to reduce inventory and disciplined capital allocation.”