Rolls-Royce has promised a significant improvement in its performance after “growing pains” caused half-year profits to drop by a fifth.
The engines giant said the figure of £644m was in line with guidance in Feb ruary, when it shocked the City with a warning that it will fail to grow in 2014 due to the impact of defence spending cuts.
Yesterday, chief executive John Rishton forecast that higher revenues and cost reductions will drive a better performance in the current half and said that the group’s long-term growth prospects remain “outstanding”.
He pointed to the large civil aerospace engines market, where its share of units on order is currently more than 50 per cent.
However, Mr Rishton said: “We will experience growing pains. For example, we are investing in new capacity ahead of delivering our order book and restructuring existing facilities to improve efficiency.”
Among its investments, Rolls opened a new £100m facility at Washington, Tyne & Wear with the capacity to make 2,500 fan and turbine discs a year.
It also said that it has 600 engineers working to reduce cost, with 400 focused on original equipment and 200 on the aftermarket.
The group added that the strength of sterling hindered its performance in the first half. Changes in average spot rates reduced revenues in the first half by £226m.