Commenting on the results, Warren East, Chief Executive, said: “Rolls-Royce made good progress in 2017. Financial results were ahead of our expectations and we achieved a number of important operational and technological milestones, but were impacted by the increasing cost and challenge of managing significant in-service engine issues.
“The business unit simplification and restructuring programme that we announced this January will drive further rationalisation and is a fundamental step in the journey started two years ago to bring Rolls-Royce closer to its full potential both operationally and financially.
“We are encouraged by the improving financial performance in 2017 with growing revenues contributing to improved profitability and cash generation. Looking forward, sustaining this improvement and delivering increasing cash flow generation will strengthen our position as one of the world’s leading industrial technology companies.”
Group financial highlights
-- Reported revenue of £16,307m; up 6% on underlying basis, Civil Aerospace service revenues up 12%
-- Underlying profit before tax up 25% to £1,071m; strong contribution from Power Systems
-- Reported profit before tax of £4,897m; includes a £2.6bn non-cash profit (2016: £4.4bn loss) from the revaluation of our $38.5bn hedge book as sterling strengthened
-- Free cash flow improvement driven by improved profits and good working capital management
-- 2016-17 transformation programme achieved £200m run-rate savings; at top end of guidance
-- €718m ITP Aero acquisition completed in December 2017, first instalment in shares (9.61m issued)
Group operational highlights
-- Civil Aerospace widebody invoiced flying hours up 12%; significant in-service engine issues: in-year £170m cash cost (2016: £90m) and £227m charge to profit (2016: £98m)
-- Large engine deliveries up by 35% to a record 483 (2016: 357 engines)
-- Good further progress with Trent XWB-84 OE economics (cash deficit down 37%)
-- Successful UltraFan Power Gearbox testing and Advance3 engine first run completed
-- Strong recovery in Power Systems under new leadership; revenue growth, significant cost savings and strong cash generation
-- Marine results stable year on year; restructuring benefits delivered; strategic review of Commercial Marine business underway
2018 Reporting & outlook
Rolls-Royce has adopted the IFRS 15 revenue recognition accounting standard from 1 January 2018. As a consequence, our financial results for 2018, commencing with the first half results, will be reported under IFRS 15.
2018 results will also be reported using the new business unit structure and therefore the outlook comments set out below are made on this basis. The impact of adopting IFRS 15 is preliminary and as processes and procedures are further embedded during 2018, it is possible that some changes to the impact may result.
Click here for the full statement, on the Rolls-Royce website.