Maker of Barrow submarine reactors predicting boost in profits

HMS Astute leaving Barrow in 2015 thanks to power generated by Rolls-Royce.
HMS Astute leaving Barrow in 2015 thanks to power generated by Rolls-Royce.
Friday, June 16, 2017 at 5:17PM

Rolls-Royce has said the collapse in sterling will give it a £400m boost to revenues and a £50m rise in profits.

The engine maker - which has the contract to supply the PWR1 and PWR2 reactors, used to generate power for all Royal Navy submarines built since 1966 - said in a trading update that it will benefit from overseas dollar sales once they are translated back into the Brexit-battered British currency.

"If rates remain unchanged from those seen recently, the impact of the average year-on-year movement on the translation of our overseas subsidiaries results would improve full- year reported revenues by around £400 million and improve reported profit before tax by around £50m," the company said.

The pound has plummeted since the Brexit vote against the dollar and euro, boosting British exporters and hurting importers.

It comes after dire results for 2016, which showed Rolls plunging into the red with pre-tax losses of £4.64bn after being hit by a £4.4bn writedown, as well as a £671m penalty to settle bribery allegations.

In contrast, Rolls said 2017 has started well, with all businesses performing in line with expectations.

Its estimates for first-half revenue, profit and free cash flow remain unchanged.

Chief executive Warren East said: "2017 has started well, although we have a great deal more to do to deliver the full year. As expected, near-term cash flow performance remains challenging as we continue to invest in transforming and growing the business to benefit future years.

"News updates around events such as the Paris Air Show are increasingly expected to reflect our transition from a period of above-trend order book growth to one of operational delivery.

"Our ramp up in large engine production is progressing well, reflecting the significant investments in manufacturing capability in recent years."

Under Mr East, the group is on track to make annual savings of about £200m by the end of the year.

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