Rolls-Royce dashes growth hopes

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Rolls-Royce has dashed hopes for a return to growth next year after seeing customers delay or cancel orders due to worsening economic conditions.

The engines giant, which has a base at the Advanced Manufacturing Park in Rotherham, warned the tough climate would increase its focus on costs, including headcount.

Rolls-Royce previously ruled out growth this year due to defence spending cuts but now expects that profits in 2015 will also be up to three per cent lower.

The company said: “In the last few months economic conditions have deteriorated and Russian trade sanctions have tightened, leading a number of customers to delay or cancel orders particularly in our nuclear and energy and power systems businesses.”

Rolls-Royce shares slumped seven per cent following the updated guidance, which was issued less than three months after a 20 per cent drop in half-year profits.

Revenues for this year are now expected to be between 3.5 per cent and four per cent lower than a previous forecast for no change, but control of costs mean it will continue to meet its previous target for flat profits.

It remains hopeful that civil aerospace markets will strengthen over the medium term due to increasing demand for travel in emerging economies and the need to replace older aircraft with new fuel efficient models.

Chief executive John Rishton said: “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 drivers.”