Rolls-Royce has reported its record pre-tax loss of £4.6 billion. This is the worst result the company has had in its 111-year history.
According to News on Hand, the £4.6 billion pre-tax annual loss reported by Rolls-Royce ranks as the largest deficits in the history of the company. The CEO of aero-engine maker Warren East said that despite the drop in sterling after Britain’s vote to exit EU, the loss has no impact whatsoever on what is really going on in their business.
The DerbyTelegraph reported that Rolls-Royce hedges billions of pounds in cash to protect itself against currency fluctuations because the deals in the aerospace industry are conducted in dollars. By the accounting rules, Rolls-Royce has written down the value of its currency hedges to reflect the sterling’s slump. However, the sales of the company have risen by 9%, just shy of £14 billion. And in terms of their order book, it now stands at £79.8 billion, which is higher than it was in 2015 when it stood at £76.4 billion.
Taking away the impact of currency change and the fines that Rolls-Royce had to pay, the company actually made a profit. The profit was £813 million, which is 49% less than 2015 when they made £1,432 billion profit. Rolls-Royce is composed of a number of businesses. Civil aerospace is their largest business, and it accounts for just over half of the firm’s sales. In 2016 the sales of their Civil aerospace business were steady at just over £7 billion, but the profits were down 60% to £367 million.
Their Nuclear business saw sales rise by 11% to £777 million, but the profits slipped back by 37% to £45 million. Mr.East said that 2016 has been an important year for Rolls-Royce. Despite the significant market and aerospace product transition challenges identified in 2015, they have made operational progress and performed ahead of the expectations. According to Mr.East, the transformation program has saved the company £60 million last year, and it is expected to save £80 to £100 million this year.
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