Britain’s Rolls-Royce tumbles to record $5.8 billion loss

Reuters: Rolls-Royce suffered a record headline loss of 4.6 billion pounds ($5.8 billion) on Tuesday as a fine to settle bribery charges and the collapse in the pound from Brexit capped a difficult few years for the British aero engine maker.

Already reshaping its business after a series of profit warnings, Rolls said it needed to cut more costs after its underlying profit halved to 813 million pounds last year -- a result that was better than analysts’ expectations.

Chief Executive Warren East, brought in to restructure the group in 2015, said the business portfolio was “broadly correct”, but he needed to review 20% of its operations, and would decide on further actions in the coming months.

Rolls-Royce, which makes engines for wide-body civil jets, and defence and marine customers, said it expected “modest performance improvements” this year and would aim to keep its free cash flow at a similar level to 2016.

“While we have made good progress in our cost cutting and efficiency programs, more needs to be done to ensure we drive sustainable margin improvements within the business,” East said.

Last year, the group halved its dividend to shore up its finances, the first cut in the payout for 24 years.

It kept the dividend at the same level this time, a move it said would allow it to maintain a degree of flexibility in its balance sheet.

The drop in the pound against the dollar resulted in a 4.4 billion pound non-cash charge on its hedging book, which increased to $38 billion. Most aircraft deals are priced in dollars, forcing Rolls-Royce to hedge future income.

The headline loss also included the 671 million pounds it agreed to pay to settle bribery investigations in Britain, the United States and Brazil last month. The sum is payable over five years, but Rolls-Royce has taken the full charge now.