Rolls-Royce set to post record losses of £4bn
The Engineering giants are hit hard by the cost of Brexit and last year's corruption scandal
by Abi Moses on 13th February, 2017 and updated 13th February, 2017 12:49pm
Rolls-Royce are set to announce huge losses this week as the engineering giants feel the effects of both Brexit and their recent corruption scandal. City analysts have predicted Rolls-Royce will report one of the biggest losses in British corporate history, with pre-tax losses expected to be confirmed at around £4bn.
The Derby-based firm had to pay a £671m penalty in the wake of their recent corruption scandals in the UK, USA and Brazil. That coupled with the effect Brexit has had on the value of the Pound have been the main contributing factors to their expected record loss.
Since the referendum last June, the Pound has lost one fifth of its value against the Dollar. With all aerospace deals conducted in dollars, Rolls-Royce hedges billions of pounds in cash to protect them against currency fluctuations. To reflect Sterling's slump since last June, accounting rules mean the firm will be forced to write down the value of its hedges.
Despite their huge losses, the company have told its shareholders that it enjoyed a "good finish" to the year. New chief executive, Warren East, has come in for praise from several quarters and remains in a positive mood. Mr East took over in 2015 with the firm in decline and set out a company overhaul. East aimed to make the building of engines a faster and more efficient process, followed by a cut in the dividend pay-outs made in 2016 to shareholders – the first cut in 24 years.
Mr East has also been praised by Sir Brian Leveson, the judge responsible for approving the deferred prosecution in court, following the corruption and bribery charges. The co-operation of the new management team, led by East was the main factor contributing to Rolls-Royce being able to avoid a criminal trial.
With their record losses set to be posted tomorrow, the Rolls-Royce share price could be hit. If you share their chief executive's belief that they are set to come out stronger from a difficult year, then maybe now is the ideal time to invest in one of Britain's great corporations. Head over to the Spread Betting homepage, find a suitable broker and keep an eye on those share prices.
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