Rolls Royce (RR.) back in poll position despite engine problems

Trent 1000 engines continue to cause problems but the company still saw rising revenues.

Article updated: 6 August 2019 10:00am Author: Ian Forrest

  • 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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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.