17th Oct 2014 06:24
LONDON (Alliance News) - Rolls-Royce Holdings PLC Friday updated its guidance for the full year and next year, while providing medium-term guidance, as it said it now expects underlying revenue this year to be lower and said its outlook for 2015 has become more challenging.
The FTSE 100 engineering and aerospace group said its expects underlying revenue for the full year to be 3.5% to 4% lower, compared to previous guidance of flat revenue against the comparable year. This includes adverse foreign exchange translation for the group estimated at GBP500 million, the same as it has previously announced.
The major reduction in the outlook for its divisions came for its Nuclear & Energy business, where it has reduced its expectations for underlying revenue growth to 0% to 5%, from 5% to 10%, due to the wider negative market conditions and the impact of the impending sale of its energy gas turbine and compressor arm.
Due to cost reductions, it has maintained its guidance for underlying profit in 2014 at flat, with adverse foreign exchange translation now estimated to be slightly lower at GBP60 million from GBP70 million previously.
Rolls-Royce cut its profit guidance for its Power Systems and Nuclear & Energy arms but upgraded its profit guidance for its Civil Aerospace and Defence Aerospace arms.
For 2015, Rolls-Royce said the economic outlook for that year has deteriorated since its interim results and said it would accelerate cost-cutting measures in order to mitigate any impact. It said its Power Systems and Marine arms are likely to suffer from the impact that worsening economic conditions will have on investment decisions by its customers.
It also said sales for its Civil Aerospace arm's Trent 700 engine would be impacted by the launch of the Trent 7000.
Rolls-Royce said it expects growth to resume next year, but said its best estimate for underlying revenue in 2015 at present is for 3% growth or contraction, and for profit between 0% and 3% higher against 2014 at constant exchange rates.
For the medium term, it said its business is well-positioned to achieve growth, though it warned it is difficult to precisely forecast revenues and so did not provide medium-term guidance on group revenues given the wide range of variables its business units face.
"While the short term is clearly challenging, reflecting the economic environment, the prospects for the group remain strong, driven by the growing global requirement for cleaner, better power. The operational efficiencies already achieved and the cost programmes we will now accelerate will put us in a better position to benefit from these growth driver," said Rolls-Royce Chief Executive John Ritson.
By Sam Unsted; [email protected]; @SamUAtAlliance
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