Rolls-Royce engine fix set to cost manufacturer nearly £1.5bn

The manufacturer has long been investigating serious issues with the compressors in its Trent 1000 units.

In June, the British firm established the fault was present in two batches of its engines.

Its half year results, issued on Thursday (June 2), reveal the company has set aside a further £550 million for the works this year., taking the total projected cost to nearly £1.5 billion.

Major Trent 1000 customers include Boeing, who use the engines on its 787 jet aircraft.

Warren East, Rolls-Royce chief executive, said: “We continue to be impacted by the challenge of managing significant Trent 1000 in-service issues and have recognised an exceptional charge of £554m.

[This] represents the profit impact of that part of the total current and estimated costs out to 2022.”

East though said Rolls-Royce was ahead of its financial expectations during the six months to June 30, despite posting a pre-tax loss of £1.3 billion engorged by the engine repair costs, citing strong growth from civil aerospace and power systems.

He added the group expected underlying profit and cash flow for 2018 to be in the “upper half” of its estimates.

Fixing its Trent 1000 and Trent 900 engines will, come the end of the year, have likely cost Rolls-Royce in excess of £600 million, with £450 million budgeted for 2019 and £350 million for 2020.

It said it expects its 2019 combined cash costs to be similar to 2018 (£450 million), with 2020 falling “at least £100 million”.

In May, Rolls-Royce confirmed it was cutting around 10% of its workforce, approximately 4,600 jobs, in a bid to save £400 million a year.

A complete restructure of the business is expected to cost £500 million to the end of 2020, offset by its targeted £400 million yearly savings by the same milestone.