Rolls-Royce underlying first-half profits down 76%

28th Jul 2016 07:46

(ShareCast News) - Underlying pre-tax profits at Rolls-Royce fell 76% to £104m in the first half as underlying revenues came in at a better-than-expected £6.14bn, a decline of 5%.Rolls said pre-tax losses came in at £2.15bn from a £310m profit last year largely as a result of a revaluation of its US dollar hedge book after sterling's recent collapse in the wake of the UK's decision to leave the European Union."At the same time, the weakness in sterling does present near-term opportunities by providing scope to reduce the average hedge book rate and to benefit from a better conversion of our overseas revenues and costs to marginally enhance our underlying performance," Rolls said."As a result, the weaker pound will enhance underlying full year earnings in future years to the extent our effective hedge rate declines over time."Rolls said while recent political and economic developments have added "some uncertainty to near-term utilisation" it continued to expect that strong widebody airframe demand - driven by the need for newer, more fuel efficient aircraft - should provide resilience to manufacturing schedules over the next few years as the industry undergoes a strong replacement cycle.Chief executive Warren East said the company had performed "broadly in line with expectations, delivering a result a little better than breakeven", adding that the outlook for the rest of the year remained unchanged.East said volume and price reductions on the Trent 700 engine, legacy aftermarket reductions and marine markets caused most of the weakness in the half."Order intake has been good and, although known headwinds constrained revenue and profit in the first half, the business remains well positioned to deliver a solid second half performance supported by growth in engine deliveries, stronger aftermarket revenues and incremental benefits from our ongoing restructuring programmes."