Rolls-Royce has reported a 32 percent drop in half-year profits but the result was slightly better than expected after the engine maker slashed its forecasts three times in the last nine months.
Earlier this week Rolls-Royce announced an investment of up to £60million in its facility in Inchinnan in Renfrewshire, creating around 130 jobs and partially offsetting the 187 job losses announced in March.
Rolls-Royce shocked investors earlier this month when it warned profits at its main aero engines business would falter next year, adding to declines seen in its marine division, where a lower oil price has caused a slowdown in orders from energy customers.
That warning turned up the heat for new chief executive Warren East who joined the business this month.
Reassuring investors that there was not another downgrade to come, the company reported on an underlying pre-tax profit of £439m for the first six months of the year, ahead of its own guidance of £390m to £430m.
The company blamed a slowdown in its marine business, a slightly higher research and development charge, and a shift in the mix of airliner engines it sells as newer models are less profitable in the early years.
Shares in Rolls-Royce, which had sunk 17 percent in the past month to hit their lowest level for over three years, rallied by over two per cent.
Mr East said that the second half outlook was positive and beyond that he was working to ensure the company would be able to deliver on its targets.
Having announced an operational review earlier this month, he said he would report his "early priorities" before the end of 2015.
Mr East joined as shake-up plans were already underway in Rolls-Royce's marine and aerospace divisions, with plans to cut 3,200 jobs to improve profit margins.
“I am going to be working with the team to add pace and simplicity into what we're doing,” he said of the restructuring.
The downgrade to its forecasts announced in July, which cut the consensus market forecast for profits next year by about 20 percent, was primarily driven by the civil aerospace division, which accounted for almost half of 2014 revenues.
That knocked confidence in a part of the business which had for years been riding a surge in demand for fuel-efficient engines for power passenger jets made by Airbus and Boeing.
Asked about a possible new aerospace project to provide an engine for a new version of the Airbus A380, Mr East said the company hoped to provide if it could make the business case.
RBC analyst Robert Stallard said in a note: “Given the performance of the share price in July, we think the response from investors today could be one of relief - at least the situation has not got worse,” adding that Rolls still had a lot to do in the second half of the year to meet forecasts
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here