Rolls-Royce says full-year performance on track

Rolls-Royce said its financial performance for 2017 is on track despite continued weak demand in the offshore oil and gas market.

The engine maker said in a trading update it was making good progress in efforts to turn around its business and that its strategy remained intact.

Warren East, Rolls's chief executive, said: "We have made steady progress in the second half of the year. Overall, while we have a good deal left to do in the last two months of the year, our performance for 2017, for revenue, profit and free cash, remains on track."

He said civil and defence aerospace and power systems were performing satisfactorily but that Rolls's marine business was still suffering from weak demand from the oil and gas sector. Oil companies cut back on investment after the oil price plunged by more than half from its $110 a barrel level of summer of 2014.

Despite a partial recovery in the oil price from less than $30 a barrel to around $60, East said the industry's demand for Rolls's products and services remained weak.

East, the former boss of ARM Holdings, took over at Rolls in 2015 after a string of profit warnings that knocked confidence in the former beacon of UK engineering. He has pledged to strip out cumbersome bureaucracy that he said left the company unable to respond swiftly to market changes.

He said Rolls was investing for the long term so that it could capitalise as customers move towards electrification and digital technology.

East said: "Our transformation programme is proceeding well, providing some of the cost savings that underpin our business performance while pursuing opportunities to further simplify our business structure and processes.

"By increasing our expertise and scale in activities where electrification is relevant today, such as power systems, we will be better placed to benefit where electrification is still some years away, such as for propulsion systems for civil aerospace."

Underlying revenue was £13.8bn last year with about half coming from after-sales services. Analysts expect revenue of £14.3bn this year.