Rolls-Royce Holdings Vows to Boost Cash Flow Even as Repair Costs Rise

   By Robert Wall 
 

LONDON--British aircraft-engine maker Rolls-Royce Holdings PLC (RR.LN) on Friday pledged to boost cash flow even as it grapples with the rising costs of fixing one of its flagship engines powering Boeing Co. (BA) 787 Dreamliners.

Rolls-Royce has been struggling with its so-called Trent 1000 engine, with excessive wear and tear on some parts requiring urgent repairs. Fixing the engines has forced airlines to idle planes and rent replacement aircraft to operate their services, raising their costs and disrupting passenger travel plans.

Rolls-Royce on Friday said the repair costs have risen another 100 million pounds ($132 million) in recent weeks as new problems were discovered. It previously said the costs to fix that engine, as well as another model used on Airbus SE (AIR.FR) A380 superjumbos, reached GBP170 million last year and will rise to GBP340 million this year.

The company said belt tightening will allow it to maintain full-year guidance of between GBP350 million and GBP550 million in free cash flow before restructuring costs.

Rolls-Royce on Thursday said it would incur GBP500 million in restructuring costs through 2020 associated with 4,600 job cuts, the biggest staff reduction in more than a decade, as it tries to close a profitability gap to rivals such as General Electric Co. (GE)

Rolls-Royce said it will meet a long-promised 2020 target for cash-flow generation. Chief Executive Warren East previously said the company would deliver about GBP1 billion in free cash around 2020 and Rolls-Royce now says it is "well-placed" to exceed the figure at that time.

Ahead of an investor briefing on Friday, the company said it will work to boost cash generation from GBP0.15 a share last year to more than GBP1 in the mid-term, without giving a fixed deadline. Cash flow return on invested capital should rise to 15% from 9% last year, the company said.

In a statement, Mr. East said that "after a decade of significant investment we are committed to delivering significantly improved returns."

Write to Robert Wall at [e-mail]

(END) Dow Jones Newswires

June 15, 2018 02:50 ET (06:50 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.