Reporting an 8 per cent drop in underlying pre-tax profits for 2014 to £1.6bn and the first fall in underlying revenue for a decade, the aero-engine company cautioned that the dramatic drop in oil prices since last summer had created “increased uncertainty” for many of its customers, particularly in marine offshore, says Financial Times.
The group expects pre-tax profit to fall in 2015 to £1.4bn-£1.55bn on revenues of £13.4bn-£14.4bn.
John Rishton, chief executive, said “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”, including a major restructuring programme in the aerospace division and continued rationalisation of the land and sea division.
Mr Rishton highlighted Rolls-Royce’s future potential with a record order book, which stands at £73.7bn. However, analysts' first reaction was disappointment.
Alex Joyner, senior analyst at Galvan Research, said: “After its worst year in a decade, punctuated by multiple profit warnings, these figures will do little to reassure long-term investors."
“True, guidance has been met and the record order book provides a
glimmer of hope. However . . . Rolls-Royce has failed to deliver on
promised cost-cutting measures.”
Last year, the civil business saw profit before tax of £942m on sales of £6.8bn, up 12 per cent on 2013. Civil business accounts for roughly 60 per cent of turnover.
The crisis in defence spending over recent years continues to take its toll, with profit before tax in this business falling 16 per cent to £366m, while sales dropped 20 per cent to £2.1bn.
Before financing tumble 41 per cent and 14 per cent respectively, marine and powers systems saw underlying profit, as they significantly rely on an offshore oil industry.
On Friday the company also announced that James Guyette, president and chief executive of Rolls-Royce North America, would retire in May after 17 years with the company.
