1st May 2014 07:44
LONDON (Alliance News) - Rolls-Royce Holdings PLC Thursday said it still expects to post flat revenue and profit in 2014, excluding a hit from exchange rate movements and a charge for its marine division, even though it has now also cut its profit guidance for that unit.
In a statement, the aircraft and marine engine makes said it now expects profit and revenue in its marine unit to fall 10% compared with 2013 due to a one-off charge estimated at GBP30 million to rectify a "product quality issue" and due to lower services volumes.
The company saw its shares fall sharply in mid-February after it surprised markets by warning that it expected a pause in overall profit and revenue growth in 2014 due to falling revenue in its defence businesses and lower marine unit revenue. At that time, it had predicted modest growth in marine profit.
"We remain confident that the group will resume growth in 2015," it said in its statement Thursday.
Rolls-Royce, which earlier this week said it is in talks with Germany's Siemens AG about a possible sale of its energy gas turbine and compressor business, said it expects to book about two-thirds of its 2014 group profit in the second half of the year. It said the marine charge and higher restructuring will weigh on its first-half performance, while the second half will be buoyed by better trading and cost reduction improvements.
"As a result, free cash flow during the first half is expected to be between GBP200 million and GBP400 million lower than during the first half of 2013," it said, adding that it still expects 2014 free cash flow to be similar to 2013.
The company also said it currently estimates that currency movements will knock GBP40 million off profit and GBP300 million off revenue.
Rolls-Royce said it will report its first-half results on July 31.
Its shares were down 1.7% at 1,032.00 pence early Thursday, one of the biggest decliners on the FTSE 100.
By Steve McGrath; [email protected]; @stevemcgrath1
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