Rolls-Royce 2018 earnings to be at top end after job cuts

LONDON: Rolls-Royce Holdings Plc said full-year earnings will be at the upper end of a forecast range after job cuts and a management revamp helped the UK aero-engine maker beat first-half estimates.

London-based Rolls aims to post an underlying operating profit of £400mil to £500mil, after previously expecting the figure to fall within a 100 million-pound range of 400 million-pounds, it said in a statement yesterday.

Chief executive officer Warren East has cut thousands of jobs, reorganised the business to make it more responsive to demand and struck deals to sell ailing ship-design and fuel-injection divisions since taking over in 2015.

The group posted an underlying pretax profit of £81mil for the first half from a loss of £126mil. Analysts had forecast a £60mil deficit.

Rolls has “growing confidence for the full year,” East said in the release, while adding that the company still faces challenges from glitches with the Trent 1000 engine that powers Boeing Co’s 787 Dreamliner jet.

Rolls-Royce shares rose as much as 5.1% and were trading 1% higher at 996.80 pence as of 8.12am in London, taking gains this year to 19% and valuing the group at almost £19bil.

Group free cash flow will be about £450mil this year, plus or minus £100mil.

The company will book a charge of £554mil against the Trent 1000’s impact on profit through 2022, and said cash spend on the issue will be higher both in 2019 and 2020.

“The Trent 1000 bad news is outweighed by good progress on the metrics that really matter to the equity story,” Jefferies International analyst Sandy Morris said in a note to clients. — Bloomberg