Brexit sends Rolls-Royce crashing to record loss

Sterling's slump in value following the Brexit vote pushed jet engine-maker Rolls-Royce to a record loss last year.

The engineering giant, which separated from the car-marker in 1971, reported a £4.6bn loss for 2016, the largest in its history.

Huge one-off costs were the major contributor, particularly a "£4.4bn writedown on the value of financial hedges that Rolls uses to protect itself against currency fluctuations", says The Guardian. The value of the pound has slumped around a fifth against the dollar since the EU referendum last June.

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Rolls-Royce was also hit with a £671m legal settlement relating to 25 years of bribery and corruption charges.

The company formally admitted last month making illegal payments to secure contracts in countries including Brazil, China, India, Indonesia, Malaysia, Nigeria, Russia and Thailand.

Although the payment will be spread out over five years, it has been fully realised in this year's accounts to "draw a line in the sand".

This certainty over the cost of the scandal, added to better-than-expected underlying profits after one-off costs, which dropped 49 per cent to £813m, initially limited the impact on Rolls-Royce's share price.

However, while trading was down just 2.5 per cent at around 9am, it begun to head lower again soon afterwards.

Analysts are concerned Rolls-Royce is still struggling to maintain margins and that the fall in underlying profits shows the need for a more radical turnaround plan.

"[Rolls-Royce] is still expanding production at a breakneck pace, which drains its reserves, and must still decide whether to take the drastic medicine advocated by some and shed some of its operations, such as the marine engine operation," says the BBC's Dominic O'Connell.

Calls for former Rolls-Royce boss to be stripped of knighthood

19 January

Labour is calling for the former chief executive of Rolls-Royce, Sir John Rose, to be stripped of his knighthood after the FTSE 100-listed company admitted to decades of corruption, says The Guardian.

On Tuesday the Derby-based firm, described by one judge as "a jewel in the UK's industrial crown", according to the BBC, admitted to "egregious criminality" stretching back over more than two decades.

Rolls-Royce has settled a long-running investigation brought by the Serious Fraud Office in Britain, as well as regulators in the US and Brazil, by agreeing to pay £671m in a "deferred prosecution agreement" that means it avoids formal criminal charges.

Broadly, the charges relate to illegal payments and bribes made to intermediaries to secure contracts in countries that include Indonesia, Thailand, India, Russia, Nigeria, China and Malaysia.

In addition to agreeing to a financial settlement, Rolls-Royce has brought disciplinary proceedings against 38 of its employees. Eleven left the firm during the disciplinary process, while six were dismissed, says the BBC.

The company has also reviewed all of its 250 intermediary relationships, suspending 88.

But after the engineering giant's share price jumped 4.5 per cent on the day Rolls-Royce announced it had agreed a deal with regulators – a day that the firm also upped its profit forecasts – some campaigners say justice has not yet been done.

Robert Barrington, executive director at Transparency International UK, says that no senior executives past or present have "been held to account" and that the market response suggests the settlement "isn't really a punishment or deterrent".

The SFO says investigations into specific individuals are ongoing.

Barry Gardiner, the shadow secretary of state for international trade, told the Guardian that Sir John Rose, who held the top job at Rolls-Royce between 1996 and 2011, should be punished by being stripped of his knighthood.

"If Sir John Rose was the controlling mind in the company at the time, and was aware of these allegations, then he is not fit to hold his knighthood," Gardiner said.

"If in fact he was the chief executive of a company in which there were widespread corrupt practices going on, and he was unaware of that, then one has to ask whether he was fit to hold office as chief executive.

"Given that it is for services to the industry as chief executive that he was knighted, again it comes back to him not being fit to hold his knighthood."

Lib Dem adviser implicated in Rolls Royce bribery allegations

1 November

One of Liberal Democrat leader Tim Farron's political advisers, who has donated more than £1.6m to the party, is at the centre of a fresh wave of bribery allegations against Rolls Royce.

The claims follow a joint investigation by The Guardian and the BBC, the findings of which were broadcast in a Panorama programme last night.

"Britain's leading manufacturing multinational… hired a network of agents to help it land lucrative contracts in at least 12 different countries around the world, sometimes allegedly using bribes," says the Guardian.

The BBC says it "understands" Rolls Royce paid £10m to companies linked to Indian arms dealer Sudhir Choudhrie. The payments relate to a contract worth £400m to provide the engines for a fleet of aircraft in India.

The Guardian says there are "many different legitimate uses for agents in foreign countries", but that investigators are focusing on claims that "these hired intermediaries were bribing people".

A Serious Fraud Office (SFO) inquiry has been ongoing since 2012, while in 2014 the US Department of Justice opened its own investigation.

Choudhrie lives in London and gives advice on India to the Liberal Democrats. He is named on an Indian government blacklist of people suspected of "corrupt or irregular practice".

It is alleged that his son, Bhanu, accompanied arms executive Peter Ginger on a trip to Switzerland in 2007, during which payments were made into a secret bank account. Ginger was a key negotiator on the sale of Hawk aircraft to India, all of which used Rolls Royce engines.

Bhanu's lawyers say he was not paid by Rolls Royce or anyone else to secure deals and knew nothing of the payments. Ginger says he has never acted for Rolls Royce.

Both Bhanu and Sudhir Choudhrie were arrested in 2014 by the SFO. They denied wrongdoing and were released without charge.

Other specific allegations arising from the BBC and the Guardian reports include alleged bribes to win contracts with Petrobas in Brazil, which has been the subject of a major corruption scandal in its home country.

Rolls Royce payments were referenced in official evidence by one Petrobas executive to prosecutors, says the BBC.

The company says it has a zero tolerance approach to bribery and that it has curtailed its use of agents since corruption allegations first surfaced, "although it did not say [by] how many", says the Guardian.