Shares in Rolls-Royce (LSE: RR) fell over 2% in early trade this morning as it became the latest victim of the strong sterling, which weighed on the power-systems company’s revenues and profits, despite the results being in line with expectations.
Underlying pre-tax profit dropped by 20% to £644m from £804m at H1 2013, while underlying revenues slid 7% to £6,836m compared to £7,320m in the same period last year. Management were quick to say that they expected a significant improvement in profit across the second half via higher revenue and cost reductions, with financial performance always weighted towards the second half.
Elsewhere, orders slipped by 2% to £70.4bn after receiving a net order intake of £6.5bn. The company did warn of further “growing pains” while “investing in new capacity ahead of delivering our order book and restructuring existing facilities to improve efficiency.”
Shareholders will be somewhat placated by a 5% increase in the half-time payout, while chief executive John Rishton offered further reassurance, stating: “The prospects for long-term growth remain outstanding across the Group and in particular in civil large engines where our market share of engines on order is over 50%.“
Rolls-Royce also announced the appointment of former Shell vice-president of strategy & planning Ruth Cairnie as a non-executive director from 1 September, who will bring “strategic and international experience” from her roles in addressing technology and environmental challenges at Shell, and also at Associated British Foods and Keller, where she is currently serving as non-executive director.
The stock has faltered over the last 12 months, down c.14%, although shareholders who bought in at its low point in 2010 have still seen the shares multiply over two and a half times since then. Investors eyeing up the stock today can take home a 2.1% yield, too.
