Aircraft option

4 March 2003

The UK engineering group is delivering on its restructuring promises. But debt, pensions and contingent liabilities leave the group’s equity perilously exposed to any fallout from war in Iraq.

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RollsRoyce, the UK engineering group, posted a fullyear profit before tax and exceptionals of £255m, in line with forecasts. It maintained its forecast for profit growth in 2003.

The board recommended a final dividend of 5 pence per share, making a fullyear dividend of 8.18 pence.

Rolls burned £94m of cash during the year including rationalisation costs of £167m and capital expenditure of £381m. Its average net debt for the year was £1.1bn.

The deficit in Rolls's UK pension funds was about £1.1bn at year end after taking account of deferred taxation, as measured under the FRS 17 reporting standard. The company intends to keep providing a defined benefit scheme but it is consulting employees on measures to keep its deificit funding costs within the guidance it provided last August.

Rolls reported £1.1bn of gross liabilities in respect of financing arrangements on delivered aircraft, less amounts insured and related provisions. On a net basis, using Rolls's estimate of recovery value on the assets, the liability was £186m.

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