Jet Engine Maker Rolls-Royce Posts Record Loss

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The British engine maker Rolls-Royce reported a record loss of £4.6 billion before tax due to fines related to the settlement of bribery charges and a fall in the pound.

Underlying profit before tax, which excluded the impact of the revaluation of derivatives and other one-offs, fell by 49 per cent to £813 million. The loss after tax contrasted with a slender profit of £84m in the 2015, the company said.

Rolls took a £4.4bn hit from the drop in the value of the pound in the wake of Britain’s shock EU exit referendum, alongside a £671m penalty to settle bribery allegations.

The London-listed company, whose engines are used in Airbus and Boeing aircraft and which also makes power systems for use on land and sea, stated it was on track with efforts to slash costs and expected a “modest” performance improvement in 2017.

“2016 has been an important year as we accelerated the transformation of Rolls-Royce,” said the chief executive Warren East, who has overseen a radical restructuring.

“We have made operational progress and performed ahead of our expectations for the year as a whole.

“At the same time, we have delivered major changes to our management and processes and, while we have made good progress in our cost cutting and efficiency programmes, more needs to be done to ensure we drive sustainable margin improvements within the business.”

The huge annual loss also follows a tough past few years for Rolls, which faced a string of profit warnings on the back of weak demand in its aerospace and marine markets.

The company was fined £671m in January to settle bribery and corruption claims probed by Britain’s Serious Fraud Office and authorities in Brazil and the United States.

Rolls will pay the penalty over five years but has taken the full cost as an impairment charge against its 2016 profits.