Rolls-Royce shares rise despite engine problems

Rolls-Royce agreed a £671m deal with regulators to settle allegations of bribery and corruption.

Shares in Rolls-Royce rose around three percent on Thursday morning.

The company said that it expects to make underlying operating profits of between £400 million-£500 million this year.

“We continued to make good progress in the first half. Financial results were ahead of our expectations, with strong growth from civil aerospace and power systems, and we achieved a number of operational and technological milestones,” said Warren East, the chief executive.

The growth in expected profits comes despite the cost to fix cracks and other problems with two jet engines, which will cost the group an estimated billion dollars over the next three years. 

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Rolls-Royce has said that the cost of fixing the issues with the Trent 1000 and Trent 900 will cost £450 million this year and next. In the third year of repairs, it will cost at least £100 million.

“The Trent 1000 in-service engine issues have caused significant disruption for a number of our customers, which we sincerely regret,” said East.

The repairs for the engines have meant that several aircraft have been grounded, leading to flight cancellations.

George Salmon, an equity analyst at Hargreaves Lansdown, said: “Happily, they’re all showing signs of improvement. The challenge will be managing the disruption caused by failures in its Trent line, while avoiding any more mishaps.”

Shares in Rolls-Royce (LON: RR) are currently trading up 4.45 percent at 1,031.76 (1954GMT).