Rolls-Royce share price rallies even as engine issues weigh on profits

Group nevertheless expects FY profit and cash flow at upper end of guidance

Rolls-Royce share price rallies even as engine issues weigh on profits

Shares in Rolls-Royce Holdings (LON:RR) have climbed higher this morning even as the company revealed that issues with its problematic Trent 1000 engines had impacted profits in the first half of the year. The blue-chip engine maker, however, nevertheless expects to deliver full-year profit and cash flow at the upper end of its guidance.

As of 09:44 BST, Rolls-Royce’s share price had added 4.78 percent to 1,035.00p, outperforming the broader UK market, with the benchmark FTSE 100 index having fallen into the red and currently standing 0.65 percent lower at 1,035.00 points. The group’s shares have added more than 11 percent to their value over the past year, as compared with about a 2.6-percent gain in the Footsie.

Rolls-Royce’s results hit by engine issues

Rolls-Royce announced in a statement this morning that its underlying revenue had climbed 14 percent to £7 billion in the first half of the year, with higher revenue in Civil Aerospace and Power Systems helping offset flat performance at the group’s Defence division. Underlying operating profit meanwhile rose to £205 million in the first half of the year, up from £141 million in the first half of 2017.

The company, however, booked an exceptional charge of £554 million in relation to its Trent 1000 programme. Rolls-Royce now expects the FY 2019 combined cash cost for the engine issues to be at a similar level to 2018, before declining by at least £100 million in 2020.

FY profit seen at upper end of guidance

The blue-chip engine maker, however, noted that it expects both its underlying profit and cash flow for 2018 to be in the upper half of its guidance range. The news marks a boost for the company, which has been undergoing restructuring under chief executive Warren East following a string of profit warnings in recent years.

As of 10:06 BST, Thursday, 02 August, Rolls-Royce Holding PLC share price is 998.00p.

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