Trent 1000 engines continue to cause problems but the company still saw rising revenues.
Rolls Royce (RR.) back in poll position despite engine problems
- Results show rising revenues and reduction in loss before tax.
- Company confident it can cope with a No Deal Brexit should situation arise.
- With the restructuring programme remaining track, we continue to recommend the shares as a ‘Buy’.
Today’s results showed a loss before tax reduced from £1.2bn to £791mn. Revenue rose 5% to £7.9bn and the company maintained its full-year guidance but said that some of the problems previously revealed around its Trent 1000 engines were persisting. There was an outflow of cash in the first half of £391mn but the company expects that to improve in the second half as inventory reduces with £1bn of free cash flow forecast by 2020.
Shares dropped 2% in response to the news but soon recovered. It’s reassuring for investors to hear that the company is confident it can cope with Brexit, even the No Deal version, thanks to a build-up of inventory.
Our view on Rolls Royce - Buy
Ongoing problems with the Trent 1000 engines are a concern but we continue with our ‘Buy’ recommendation for investors seeking a balanced return and willing to accept a medium level of risk.
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