Rolls Royce boss insists turnaround remains on track
Rolls-Royce boss Warren East revealed first half profits would only be near break-even in a "challenging year" for the group, but insisted its turnaround was on track.
Mr East told shareholders at the embattled engine-maker's annual general meeting (AGM) in Nottingham that "good progress" had been made on his plan to return the group to health after warning over profits five times in two years.
He said first quarter trading was in line with expectations and the outlook for the full-year was unchanged, but shares sank more than 4% as he confirmed the group was relying on hopes for a better end to the financial year.
"Despite steady market conditions for most of our businesses, 2016 continues to be a challenging year," he told investors.
"Profit before financing charges and tax will be significantly weighted towards the second half, with the first six months of the year expected to be close to break-even," he added.
It is set for improved trading in the second half thanks to large engine deliveries, growth in after-market revenues and benefits from a swingeing cost-cutting programme.
At the group's AGM, Mr East said the firm was"well on track" to deliver up to £50 million of cost savings this year.
The group also said full-year results may receive a foreign exchange boost, which could add around £50 million to pre-tax profits and some £450 million to revenues.
Rolls recently gave US activist shareholder ValueAct a seat on its board in a move that will give the investor influence over the engine maker as its seeks to turn around its fortunes.
Bradley Singer - a partner and chief operating officer at San Francisco-based fund ValueAct - was appointed as a member of the science and technology committee.
Rolls has been slashing costs and restructuring after its string of profit warnings.
It revealed in February that annual profits tumbled by 12% to £1.4 billion in 2015, but this was less than feared as the firm's cost-cutting began to take effect.