Rolls-Royce reports weaker 2014 profits, expects further declines this year

13th Feb 2015 07:27

Rolls-Royce reported an underlying revenue drop of 6% in its full-year results for 2014, caused by reduced defence-customer spending and falling commodity prices.Underlying revenue fell to £14,588m in 2014, from £15,505m the year before, while underlying profit before tax fell 8% to £1,617m.This was the first time in a decade in which underlying earnings fell at the engine maker, though the results came as no surprise to the group as it claimed they were "in line with guidance".Chief executive John Rishton said: "We have met guidance for 2014 revenue and profit in challenging conditions while continuing to build strong foundations for future growth. "2014 has been a mixed year [...], reflecting reduced spending by our defence customers, macroeconomic uncertainty, and falling commodity prices."In response to these headwinds, we are taking decisive action to improve the group's financial performance and accelerating our focus on the four Cs: customer, concentration, cost and cash. This includes a major restructuring programme in our Aerospace Division and continued rationalisation of our Land and Sea Division."Rolls-Royce also warned investors that declining oil prices throughout 2014 have given its customers "increased uncertainty" and that will have a knock-on affect for 2015 profits.The company expects pre-tax profits in 2015 to drop by as much as 4%.After giving Rolls-Royce a 'buy' rating in an investor note distributed Friday morning, UBS added: "We believe that there is still upside in the aerospace sector."The commercial aerospace sector is currently benefitting from a very healthy demand environment as global air traffic continues to grow faster than GDP and the airlines have adopted a more disciplined approach to capacity management prioritising profitability over the egos of airline executives."Rolls-Royce also revealed on Friday that it has appointed a former HSBC banker as its new non-executive board director.After the company's president and chief executive officer of Rolls-Royce North America James Guyette opted for retirement, former chief executive officer and president of HSBC USA Irene Dorner has been appointed as a non-executive director at the company.She will commence in her new role 27 July 2015 and will also become a member of the Nominations and Governance Committee as well as the Safety and Ethics Committee.Chairman Ian Davis said: "I'm pleased to announce that Irene Dorner will be joining the board as Non-Executive Director. She brings a wealth of experience from international banking along with a passion for driving cultural change in large organisations."I'd like to pay tribute to the tremendous contribution Jim Guyette has made to Rolls-Royce over many years. He has helped guide the business through a period of significant expansion, especially in the North American market. His energy, good humour and commitment to our customers will be missed by us all."