logo-loader

Rolls-Royce flies lower as it withdraws from race to power Boeing’s new plane

Last updated: 10:50 28 Feb 2019 GMT, First published: 08:56 28 Feb 2019 GMT

rolls royce workers
News of the withdrawal overshadowed a decent set of 2018 results

Rolls Royce Holdings PLC (LON:RR.) has reported results ahead of expectations for 2018, but shares flew lower on Thursday morning after the engine maker withdrew its bid to power Boeing’s new mid-size plane.

The FTSE 100 group said it was taking itself out of the running to land the lucrative contract as it would not be able to deliver a “sufficiently mature product” within the timeframe specified.

READ: Rolls-Royce secures £235mln nuclear submarine contract

“This is the right decision for Rolls-Royce and the best approach for Boeing,” said Rolls’ president of civil aerospace, Chris Cholerton.

“Delivering on our promises to customers is vital to us and we do not want to promise to support Boeing's new platform if we do not have every confidence that we can deliver to their schedule.”

The news came as Rolls-Royce reported a 7% rise in revenue last year to £15.73bn (2017: £14.7bn), while operating profits doubled to £616mln (2017: £306mln) thanks to a “significant improvement” in the civil aerospace business.

But the engineer has been forced to increase the exceptional charge to fix long-running issues with its Trent 1000 engine which powers Boeing’s 787 Dreamliner.

Trent 1000 repair costs soar

Rolls has had to undertake a costly repair and compensation programme which cost it £790mln in 2018 – some £236mln more than it had expected.

The firm has also taken a £186mln hit from Airbus' recent decision to stop making its A380 plane.

Including those costs and a restructuring charge linked to its decision to axe 4,000 jobs last summer, Rolls reported an operating loss of £1.16bn.

READ: Rolls-Royce stepping up checks of Trent 100 engines

“Despite the challenges we faced on Trent 1000 in-service issues, solid progress has been made realising our ambition to make 2018 a breakthrough year, both strategically and financially,” said chief executive Warren East.

“Underlying financial results are ahead of expectations, with good growth in profit and cash flow. Following the restructuring, we announced in June last year we are starting to see the crucial behavioural changes needed to sustain our momentum.”

Rolls shares dropped 3.3% to 950.2p on Thursday morning.

--Adds additional info and share price--

FTSE rises ahead of Easter weekend, JD Sport gains on upbeat outlook -...

The FTSE 100 gained on the final morning of this shortened Easter trading week. Festive cheer was limited though, as Thames Water confirmed shareholders would not provide it with a £500 million rescue package, prompting speculation over the London supplier’s future. On a more positive...

1 hour, 10 minutes ago