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Bribery and sterling blow for engineer

Rolls-Royce plunges to worst loss and divi cut

Warren EastAerospace giant Rolls-Royce paid a heavy price for a bribery scandal and the fall in the pound as it reported its biggest-ever loss.

The engine maker announced a loss before tax of £4.6 billion for 2016 and cut its dividend for the first time since 1992.

It said adjustments for currency movements during the year and penalties linked to its bribery settlement largely accounted for the loss.

The company agreed to pay £671 million to settle corruption cases with UK and US authorities.

Underlying revenue fell 2% at constant exchange rates, while underlying profit before tax was also down 49% at constant exchange rates.

The recommended final payment to shareholders is maintained at 7.1p per share in line with changes announced in February 2015 giving a full year dividend of 11.7p (2015 full year: 16.4p).

While chief executive Warren East (pictured) said it needed to improve profit margins, he also hailed “the transformation of Rolls-Royce”.

In statement, he said: “Despite the significant market and aerospace product transition challenges identified in 2015, we have made operational progress and performed ahead of our expectations for the year as a whole.

“At the same time we have delivered major changes to our management and processes and, while we have made good progress in our cost cutting and efficiency programmes, more needs to be done to ensure we drive sustainable margin improvements within the business.”

Analysts said the result could mark the end of the bad news and said that because it reports profits in dollars this should benefit the company if the pound remains weak.

 

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