Stocks rocked by Rolls-Royce growth warning
ROLLS-ROYCE said its profits fell more than a third in the last year, and warned there will be no growth in 2014 either, sending its shares tumbling almost 14 per cent and dragging the FTSE 100 lower yesterday.
The engineering giant reported pre-tax profits of £1.76bn, down 36 per cent on the previous year, though the firm said that earnings were up 23 per cent once currency changes, derivatives movements and one-offs are taken out.
“In 2014, we expect a pause in our revenue and profit growth, reflecting offsetting trends across the business. This is a pause, not a change in direction, and growth will resume in 2015,” said chief executive John Rishton.
Revenues last year rose 19 per cent to £15.5bn, but excluding the recently-acquired engineer Tognum the growth rate was a more modest six per cent.
“It’s clearly shocked the market…It’s a weaker backdrop than we have factored in previously. It’s dragged everything else down,” said Investec analyst Chris Dyett, who cut his profit guidance by about 11 per cent.
Rolls-Royce and its rivals have been under pressure as the UK and US governments rein in defence spending, leaving them searching for growth with contracts in new markets.
The company yesterday forecast a 15 to 20 per cent drop in defence revenues in the coming year, which will be offset by “modest growth” in civil aerospace and more orders in its energy unit.
Rolls-Royce said it was too early to put a price tag on the Serious Fraud Office’s probe into claims of bribery and corruption, which “could include the prosecution of individuals and of the group”. Two men were arrested as part of the SFO’s investigation on Wednesday.