Rolls-Royce shares rise as profits move into red for 2017

Aeronautical engineering company Rolls Royce (LON:RR) reported a 25 percent rise in profits for the full year on Wednesday, causing shares to rise at market open.

Pre-tax profit rose to £1.07 billion, up from £813 million in 2016, with revenue increasing by 6 percent to £15.09 billion.

The company confirmed a dividend payment that equalled that of the year before, at 11.7 pence. Chief executive Warren East said Rolls Royce had made “good progress” in 2017, saying that it had “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.”

“2018 will be one of significant operational progress,” East continued.

“In Civil Aerospace we will continue to grow our installed widebody fleet and further reduce cash deficits on engine sales.

“At the same time over the next few years we will be continuing to implement solutions for our airline customers to address the in-service engine issues we are currently experiencing, the estimated costs of which are significant but are included in our cash flow, revenue and earnings guidance for 2018 and beyond.

“While Defence faces some challenges due to timing changes on export activity and in contract mix, we continue to have attractive longer term export opportunities.”

The figures are likely to be taken as evidence that the company has got itself back on right track, after issuing a series of profit warnings in the course of 2015. However, the company confirmed on Wednesday that a problem with its aeroplane engines that has grounded several British Airway flights will take “some years” to fix, as well as highlighting the possibility of further job cuts going forward.