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Rolls-Royce spent £100m on Brexit preparations

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
The logo of Rolls-Royce is pictured at the World Nuclear Exhibition (WNE), the trade fair event for the global nuclear community in Villepinte near Paris, France, June 27, 2018. Photo: REUTERS/Benoit Tessier

The CEO of engine maker Rolls-Royce (RR.L) on Tuesday said the company spent around £100 million preparing for Brexit and would be ready if no deal Brexit happens.

Warren East told BBC Radio 4’s Today Programme: “We've grown the amount of inventory that we have, inventory and other measures to deal with issues around Brexit, totalling around £100 million at the moment.

“We would obviously prefer a deal, because that is the best chance of providing certainty for business, but we’ve always been prepared for a no deal of some kind.”

East said Rolls-Royce, which makes engines for planes and other heavy industry, is not a “just in time business” and so could built up a backlog of stock unlike car manufacturers. He added that WTO rules apply to the aerospace industry.

His comments came as Rolls-Royce reported half-year results showing narrowing losses but continued problems with its Trent 1000 engines, which has suffered from reports of cracking blades since 2016.

Rolls-Royce made a pre-tax losses of £791 million, compared to £1.2 billion a year ago. Underlying half-year profits rose 16% to £94 million for the six months to June 30, while underlying operating profits jumped 32% to £203 million.

Problems with Trent 1000 turbines were still causing some customer disruption, the company said, and in-service costs are set to increase by £100 million over the next three years.

East said in a statement: “We have made good progress on resolving the Trent 1000 compressor issue, though, regretfully, customer disruption remains.”

Rolls also revealed an extra £59 million charge related to Airbus’s decision to stop production its A380 superjumbo aircraft. It takes the total hit from the move to £245 million.

Rolls said it was still on track to meet its 2019 target for underlying operating profit and free cash flow of £700 million, plus or minus £100 million.

Shares in Rolls-Royce were down 1.7% in early trade in London.

READ MORE: Just 3 out of 10 exporters are ready for a no-deal Brexit