Rolls-Royce share price slides as group flags further engine inspections

Extra checks to result in higher cash costs for the current year

Rolls-Royce share price slides as group flags further engine inspections

Shares in Rolls-Royce Holdings (LON:RR) have fallen into the red in today’s session as the group warned that it needs to increase the number of inspections of its Trent 1000 engines, with the move resulting in higher costs. The news comes after the company recently warned that the cost for fixing the issues with its Trent 1000 and Trent 900 engines would broadly double from the total cash cost in 2017 of £170 million and reach a peak this year.

As of 08:36 BST, Rolls-Royce’s share price had given up 1.57 percent to 867.40p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.09 percent lower at 7,251.80 points. The group’s shares have added more than five percent to their value over the past year, as compared with about a one-percent dip in the Footsie.

More engine inspections

Rolls-Royce announced in a statement this morning that it had decided to carry out additional engine inspections on its problematic Trent 1000 engines to those it had previously planned.

“The increased inspection frequency is driven by our further understanding of the durability of the Trent 1000 Package C compressor,” the British engine maker explained, adding that the move would “unfortunately lead to additional disruption for our customers” as well as higher cash costs than previously guided. Rolls-Royce noted that it was reprioritising various items of discretionary spend to mitigate the costs, and reaffirmed its free cash flow guidance for the current year.

Analysts on Rolls-Royce

Citigroup reiterated its ‘buy’ rating on the British engine maker this week, valuing the shares at 1,083p, while Liberum Capital continues to see the company as a ‘hold,’ with a price target of 875p on the stock. According to MarketBeat, Rolls-Royce currently has a consensus ‘hold’ rating and an average price target of 939.82p.

As of 08:59 BST, Friday, 13 April, Rolls-Royce Holding PLC share price is 867.00p.

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