Rolls-Royce agrees to pay £671m bribery and corruption settlement

Rolls-Royce has agreed to pay £671m plus interest to settle bribery and corruption allegations in the UK, US and Brazil, it announced in a statement after the market closed on Monday.

The FTSE 100 engineer said it had reached a voluntary provisional agreement to suspend prosecution if it fulfils certain requirements, including payment of the penalties to the UK's Serious Fraud Office, the US Department of Justice (DoJ) and Brazil's Ministério Público Federal.

Total payments by Rolls-Royce in the first year of all three agreements would be £293m at current exchange rates, with close to £497m due to the SFO over five years.

As well as agreeing a settlement that was said to be a record of its kind, chief executive Warren East apologised "unreservedly" for the bribery schemes, which first came to light in 2012.

Rolls-Royce had admitted, the DoJ said, to shelling out more than $35m in payments and paying officials at state-run energy companies in Angola, Azerbaijan, Brazil, Iraq, Kazakhstan and Thailand in order to win contracts.

The engineer added that, ahead of full year results on 14 February, "early indications are that the group has had a good finish to the year with both profit and, in particular, cash expected to be ahead of expectations".

Analysts at Berenberg said the figure is much larger than they had anticipated but that it was mildly positive that the issue now looked to be behind the company and that the settlement was "affordable", representing 5.5% of Rolls-Royce’s market cap and compares to our forecast net debt at the end of 2016 of £578m.

"The balance sheet is far from being stretched, and hence the financing and scheduling of payments do not present a major problem, in our view. However, for a company wrestling with multiple operational challenges, and that needs to fund a circa €720m buy-out of the ITP joint venture in 2017, such a development is clearly unwelcome."

Yet Rolls' shares rose 4.5% over the session to 695.21p.