Rolls-Royce posts lower H1 profits but sees H2 improvement

31st Jul 2014 08:42

Jet engine maker Rolls-Royce reported a hit to half-year profits but it forecast a significant profit improvement in the second half.Rolls said the results reflected an expected reduction in its defence business and weaker trading in marine, as well as an adverse foreign exchange impact.Changes in average spot forex rates had the impact of reducing underlying revenue in the first half by £226m and underlying profit before tax by £21m, compared with the first half of 2013. But it added: "We expect significant improvement in profit for the second half driven by higher revenue and cost reduction."While there are challenges, we maintain our full-year guidance for the group."Rolls said the prospects for long-term growth remained "outstanding", in particular in civil large engines where its market share of engines on order was more than half.Management were confident for the rest of the year thanks to good order cover for original equipment supplies and for aerospace services. Marine and industrial power systems are also traditionally weighted towards the second half.But chief executive John Rishton added: "We will experience growing pains. For example, we are investing in new capacity ahead of delivering our order book and restructuring existing facilities to improve efficiency."The group said its order book fell 2% to £70.4bn, underlying revenue dropped 7% to £6.8bn and underlying pre-tax profit was down 20% at £644m.Rolls said it continued to see good demand for its products and services despite the fall in orders.It said its defence aerospace order book grew for the first time since 2010 and the marine order book grew for the first time since 2012.Rolls increased its dividend by 5% to 9p. It said it would press ahead with a £1bn share buyback subject to the sale of its energy gas turbine and compressor business to Germany's Siemens.Shares in the group fell 6p or 0.57% to 1049p at 08:17 in London.PW