Engines maker Rolls-Royce Holdings PLC (LON:RR.) slumped to a hefty loss in 2016 after charges related to bribery scandals in the US, the UK, and Brazil, but is targeting an improvement in 2017.
For the full-year to December 31, the FTSE 100-listed firm reported a pre-tax loss of £4.636bn, a 49% drop on the £160mln profits recorded in the previous year.
The huge loss comes after the engineer made a £4.4bn non-cash charge for a mark-to-market revaluation of its derivatives and a £0.7bn charge for financial penalties from investigating bodies related to the bribery cases.
Rolls-Royce saw its headline revenues rise by 9% to £14.995bn, but underlying revenues were down 2% at constant exchange rates reflecting weakness in its Marine division.
However, the firm saw a good free cash flow performance, led by working capital improvements, and it maintained its final dividend at 7.1p per share, although its total payout falls to 11.70p from 16.40p, in line with a change in its dividend policy announced with its 2015 annual results.
The group also said it expects modest performance improvements in 2017, targeting free cash flow to be similar to last year.
Rolls-Royce shares topped the FTSE 100 fallers board in early trading, shedding over 2%, or 16.5p to 723.5p, but was above an opening 3% drop.
Not all bad ...
However, Neil Wilson, senior market analyst at ETX Capital, noted: “The company chalked up one of the biggest losses in corporate history, but it’s not as bad as it looks and that is perhaps why we’re seeing the stock coming back a tad after the initial kneejerk.
“Rolls took a £4.4bn hit from the weak pound following the EU referendum last June and it was fined £671m to settle bribery charges. Strip those out and the results don’t look half as bad. “
He added: “Underlying profits were down 49% at £813m, but that was better than markets had expected as revenues jumped 9% to nearly £15bn.
“The loss hasn’t affected the dividend but concerns about the marine business remain. There are lots of questions for the business about where it’s going but this huge loss shouldn’t blind investors to some solid fundamentals.”
The group’s chief executive, Warren East – who has been undertaking a radical restructuring of the group in the year or so since taking over – said: “Despite the significant market and aerospace product transition challenges identified in 2015, we have made operational progress and performed ahead of our expectations for the year as a whole.
“At the same time we have delivered major changes to our management and processes and, while we have made good progress in our cost cutting and efficiency programmes, more needs to be done to ensure we drive sustainable margin improvements within the business."
East added: "Over the next few months we will conclude our review of our strengths and investment opportunities and set out an appropriate vision for the business and the best way we can deliver sustainable shareholder value."
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