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Rolls Royce Suffers Bad 2016, but 2017 Looks Bright for UK Aerospace

03 Mar 2017 03:03:59

British aerospace companies suffered something of a mixed 2016, with the fall of the pound causing factory prices to rise at their fastest rate in years. However, that came along with a sharp uptick in orders from overseas, thanks to buying British being cheaper than ever before.

No company typified the tough year like Rolls Royce. As one of the leading supplier of jet engines around the globe, Rolls Royce enjoy a position within the industry envied by a great many. 2016 though saw the company report a pre-tax loss of £4.6 billion, thanks to a number of costly one off payments for the company.

They included a £671 million corruption settlement made after cases with UK and US authorities and a £4.4 billion write off from currency related contracts. It’s the latter which highlights just how destructive the collapse of the pound was to aerospace companies.

Like many international businesses, Rolls Royce take out long term currency trades in order to shield themselves from fluctuations in currency valuations. However, these were designed to protect RR from a fall in the dollar, not the pound. So when sterling took a dive after the UK voted to leave the European Union, the company had to take a £4.4 billion hit.

Those payments mask the fact that Rolls Royce actually did better than many analysists predicted they would, posting an otherwise profit of £813 million – although it was down from £1.4 billion for the previous year.

Yet, the aerospace industry is optimistic about the coming year. In a press release circulated last week, it was announced that 69 new aircraft rolled off the production line in January, which despite being down from the exceptional December witnessed (181 aircraft), remains a strong January performance for the industry.

A major order was also placed for single aisle engines, pushing the engines backlog up to record breaking levels, with manufacturers now having 23,392 to deliver – providing a huge boost for Aerospace testing fittings companies like us.

Paul Everitt, Chief Executive of ADS Group, commented: “January’s figures show a confident start to the year for the aerospace industry. 2017 is set to be a defining year for UK industry as it asserts its strengths in tough international markets against the challenge of Brexit.

“Through the launch of its industrial strategy Green Paper, the government has reaffirmed long-term commitment to work with the aerospace industry – through the Aerospace Growth Partnership – in support of R&D and supply chain competitiveness. This approach is encouraging world-leading companies to invest in new facilities, technology and skills, and positioning the UK to win work on future aircraft programmes.”

 

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