Rolls-Royce suffers as defence spending falls

Rolls-Royce now expects pre-tax profits of between £1.4bn and £1.55bn this year

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Falling oil prices and global economic uncertainty have forced the aircraft engine maker Rolls-Royce to slash its profit forecasts once again.

The company, which shocked the City with two profits warnings last year, saw revenues fall in 2014 for the first time in a decade as customers, including governments and oil and gas companies, cut spending.

Rolls-Royce now expects pre-tax profits of between £1.4bn and £1.55bn this year, compared with the £1.62bn it reported for 2014.

John Rishton, the chief executive, described 2014 as “a mixed year, during which underlying revenue fell for the first time in a decade, reflecting reduced spending by our defence customers, macroeconomic uncertainty and falling commodity prices”.

In recent months the group has cut 2,600 jobs and unveiled plans to overhaul its aerospace and land and sea divisions.

Rolls-Royce also announced the retirement of James Guyette, the head of its North American business, and the appointment of a former HSBC US banker, Irene Dorner, as a non-executive director.

Despite this, shares in the company rose 39.5p, or 4.3 per cent, to 944.5p , having fallen during early trading. 

Industry analyst Howard Wheeldon said: “I have been left in no doubt that management is not only on top of the situation but also that this fine company continues to have excellent medium and long term growth potential.”