Sunday 23 September 2018

Rolls-Royce to book £100m in extra costs for engine issues

The company said it could see costs associated with the issues rise from £340m to £440m.

Rolls Royce could see costs rise (Paul Ellis/PA)
Rolls Royce could see costs rise (Paul Ellis/PA)

By Ravender Sembhy, Press Association City Editor

Rolls-Royce has warned that it could incur £100 million of additional costs linked to the discovery of technical issues with its engines.

The company is grappling with problems with its Package B Trent 1000 engines, as well as a durability issue with its Package C Trent 1000 engines.

On Friday, Rolls said it could see costs associated with the issues rise from £340 million to £440 million.

The engine manufacturer said in a statement: “At the time of our full-year 2017 results in March we had anticipated that the cash costs associated with in-service issues on both the Trent 1000 and 900 would broadly double from the £170 million incurred in 2017.

The further issues encountered with Trent 1000 since our 7 March announcement could lead to combined additional 2018 cash costs of around £100m Rolls-Royce

“Our current assessment is that the further issues encountered with Trent 1000 since our 7 March announcement could lead to combined additional 2018 cash costs of around £100 million.”

But the firm said it has cost mitigation actions in place to offset the costs.

Rolls-Royce is carrying out inspections of the Package B engines, which are used by Boeing, but has said the problems will not prevent it hitting financial targets for the year.

The announcement comes a day after the engineering giant said it would axe 4,600 jobs in the latest restructuring as it looks to slash costs by another £400 million a year.

The group said the bulk of these job cuts would affect the UK workforce and would be made over the next two years, with around a third expected by the end of 2018.

Rolls said the overhaul, which follows its announcement in January that it plans to slash its five operating businesses to three core units, will impact support functions and management, including within engineering.

Rolls also said on Friday that it will meet a 2020 target for cashflow generation and boost cash generation from 15p a share last year to more than £1.

Press Association

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