Rolls-Royce shares plunge

Engine maker Rolls-Royce has reported a sharp fall in profits after the company spent £120m developing new emissions technologies.

The gas-turbine-to-aerospace-engine group's pre-tax profits were £38m in the six months to 30 June, against £159m in the comparable period in 1999.

The news sent its shares sharply lower, down more than 20% from 218.5p to 176p in morning trade on Thursday.

Excluding the one-off £120m cost, operating profits across the group rose to £214m, from £169m in the first six months of last year.

Chief executive John Rose described the £120m investment as a "positive move" that would allow Rolls-Royce to meet tough new emissions regulations.

Group sales for the six months rose 33% to £2.8bn.

Flat for 2001

The company warned that profits in 2001 would be held back partly because of delays in sales from the energy side as new emissions technology is developed and the ongoing cost of restructuring the business.

The company shed 3,000 jobs worldwide this year and is expected to cut a further 2,000 during 2001.

"We are extremely disappointed that our outlook for 2001 has been changed, but we are confident for 2001 and beyond," he said.

The Rolls-Royce share fall came as investors' doubts about current trading outweighed the longer term prospects from a strong order book.

Civil engine deliveries, which grew from 400 to 1,100 this year, were now at a record level and would continue to grow in the future, the company said.

Rolls-Royce reported a firm order book of £11.8bn, plus a further £1.6bn which has been announced but has yet to be included in the order book.

Rolls-Royce is expected to announce the sale of the light armoured vehicles business of Vickers, which it bought last year, although Mr Rose said this would be unlikely to happen by the end of the year.