Chief says Rolls-Royce spent £100m preparing for no-deal Brexit
The Rolls-Royce chief executive has said his company has spent almost £100m preparing for a no-deal Brexit, as he warned a large number of jobs could be lost if Britain crashes out of the EU.
Warren East said the unpredictable political climate had been affecting business confidence. He was speaking as Rolls-Royce reported a first-half profit in line with expectations and stuck to its financial target for the year.
The company has been stockpiling parts since late last year at its factories in Derby and Dahlewitz near Berlin in readiness for disruption caused by a no-deal Brexit. Rolls-Royce had previously put the bill for these preparations in the tens of millions.
“Uncertainty isn’t very good for business and I think you can see that in the stock market, the currency and those sorts of indicators,” East said. “We are in a much better position, fortunately, than many other companies. I don’t think many people in Rolls-Royce are going to lose their jobs as a result of Brexit directly, [but] at a lot of other companies that’s what people are looking at.”
Rolls-Royce employs 23,400 people in the UK out of a total workforce of 54,500. East said the company would maintain its operations in Britain under any Brexit scenario.
“At Rolls-Royce, we’re committed to the UK. We are spending a fortune on capital expenditure in Derby and we are not going to move from there,” he said.
Rolls-Royce’s underlying pretax profit for the six months to the end of June rose to £94m, broadly in line with expectations, from £81m a year earlier. Underlying revenue increased by 7% to £7.4bn.
The amount of cash leaving the company surged from £72m to £429m as engines waited for planes to be completed. East stuck to his target of £700m free cashflow, plus or minus £100m, this year and said cash would flow in during the second half as planes fitted with Rolls-Royce engines began flying.
His overhaul of Rolls-Royce since joining four years ago has been hampered by problems with its Trent 1000 engines, which power Boeing’s 787 Dreamliner. Rolls-Royce booked another £100m charge for repairs to grounded planes, taking the total bill for the Trent 1000 to £1.6bn by 2022.
The company also took a £59m charge linked to Airbus’s cancellation in February of its A380 superjumbo, which used Rolls-Royce engines.