Rolls-Royce shares crash on weak growth outlook

 

The City turned on Rolls-Royce today as the aerospace and defence giant warned a decade of profit growth would come to a shuddering halt this year, wiping £3.3 billion off the value of the firm.

Just hours after arrests in London stemming from a Serious Fraud Office probe into the engine maker over corruption claims, chief executive John Rishton admitted there would be a “pause in growth” for the first time since 2003, after US defence budget cuts and the completion of export programmes to the Middle East and India.

Rishton expects the 130-year-old FTSE 100 stalwart to return to growth in 2015 and profits to be stronger in the  second half of this year. But shares crashed 177p to 1034p or 15 per cent down.

The sell-off completed a miserable  24 hours for Rolls after “intermediaries” were arrested in raids as part of the probe into Rolls-Royce’s dealings in Asia launched just before Christmas. Rishton said the firm “continues to help authorities completely” with  their investigation.

Pre-tax profit jumped 23 per cent to  £1.76 billion on revenues up 27 per cent to £15.5 billion. The order book was impressive, up 19 per cent to £71.6 billion, but analysts focused on the growth blow.

US and European governments have been slashing military spending in a bid to rein in ballooning budget deficits, but the impact has been slow to hit some companies due to slow decision making among lawmakers and the long-dated nature of defence equipment contracts.

Rishton cited possible cuts by the US on the size of its Lockheed Martin-built C-130 transport fleet, and the completion of delivery of two of its major export programmes — the Eurojet EJ200 engine to the Middle East and the Adour engine to India — as the reasons behind the expected decline.

“In short, defence takes a sharp step back to where it was in 2010,” Jefferies analysts said. “We saw it coming to a degree, but were wrong-footed by defence doing better than we expected between 2011 and 2013.”

Rishton is also focused on containing the fall-out from allegations of bribery in India and China. For the past year, Conservative peer and former Herbert Smith partner Lord David Gold has been looking at Rolls-Royce’s ethics.

Rishton said: “David Gold’s review into compliance is going well; he has done some terrific work. It is absolutely essential that we don’t make any mistakes in this area.”

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Sport
John Terry, Frank Lampard
footballChelsea captain sends signed shirt to fan whose mum had died
News
people
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world