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Profits are up at Rolls, but firm reveals it seeks 'cost reductions'

February 14, 2014

GavinThompson; Gavin Thompson Assistant Editor (Business) gavin.thompson@b-

ROLLS-ROYCE has reported an increase in profits after tax but warned the business faces a tough time ahead and, in words that might worry workers, needs to cut costs.

The engine maker employs more than 3,000 people in Patchway, mainly in its defence business.

Rolls reported profits of Pounds 1.3 billion, up 23 per cent rise, after paying Pounds 434 million in tax. It does not break down figures by centre, but the defence arm made pre-tax profits of Pounds 438m, up 11 per cent.

Tom Bell, Rolls-Royce president - defence, said: "The defence team has worked hard to deliver a solid set of results in a tough environment in 2013 and I'd like to thank everyone for their contribution to this achievement. Our customers continue to have budget challenges and we need to respond by ensuring that our engines and services are priced as competitively as possible to give us the greatest chance of securing future orders. I know we can rely on our defence team in Bristol to continue to focus on cost reduction to make this achievable." Rolls chief executive John Rishton said 2013 had been a "year of good progress" with orders, underlying revenue and underlying profit all growing. There are Pounds 71bn of orders in the book waiting to be delivered. He said the priorities were "customer, concentration, cost and cash".

"There has been good progress on customer, particularly with on- time delivery," said Mr Rishton. "On concentration, we continue to focus on our two technology platforms of gas turbines and reciprocating engines. We achieved a cash inflow of Pounds 359m and improved our inventory turns."

But, in words that will raise concerns over jobs, he said: "On cost, there is more to do."

Mr Rishton went on to say the firm would not grow revenue or profit this year. He said: "This is a pause, not a change in direction and growth will resume in 2015."

Last February the Post reported 52 Rolls-Royce workers at Patchway were facing redundancy from the administration and support staff.

In April it sold its 50 per cent stake in the RTM322 helicopter engine programme, which had been managed from Patchway where some components were also made, to its French partner Turbomeca.

Shares in the firm fell sharply after the profits were announced.

Rolls-Royce'sTom Bell " Our customers continue to have budget challenges... I know we can rely on our defence team in Bristol to continue to focus on cost reduction "

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Source: Bristol Evening Post (England)

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