RR. Rolls-royce Holdings Plc

By Robert Wall 

LONDON-- Rolls-Royce Holdings PLC said a plan to boost its profitability was starting to show results even as the British aircraft engine maker on Thursday posted a big first-half loss because of an accounting hit from the weakness of the pound.

The London-based company posted a 1.8 billion pound ($2.37 billion) net loss following the revaluation of U.S. currency hedges. The noncash GBP2.2 million mark-to-market adjustment came midyear just days after Britain's vote to exit the European Union caused the British currency to plunge. Net profit the year-prior was GBP360 million.

Rolls-Royce, which makes engines for Boeing Co. and Airbus Group SE's long-range jetliners said underlying profit was GBP77 million as sales retreated 1% to GBP6.5 billion. The currency weakness was a slight tailwind at the operational level as dollar-deals translated into more pounds.

The company left its full-year earnings outlook unchanged, with expectations of a decline in sales and revenue. Rolls-Royce in May said its profit would mostly be made in the second half of the year.

Rolls-Royce shares rose 5.53% in early London trading.

Rolls-Royce, no longer affiliated with the luxury car maker, is recovering from several profit warnings that led it to cut its dividend for the first time since 1992 after profit slumped. The company has suffered lower demand for some of its most profitable products and struggled with the impact on demand from low crude prices on its marine and power-systems operations.

"Order intake has been good and, although known headwinds constrained revenue and profit in the first half, the business remains well positioned to deliver a solid second-half performance," said Chief Executive Warren East, who has just completed his first year in the job.

Mr. East has been trying to trim costs and cut management layers. Mr. East said 270 manager of 400 expected to leave the business this year had already departed.

The focus now is shifting to simplifying business process to boost efficiency, he said.

Mr. East said the turnaround program put in place last year was starting to deliver results. Savings generated this year should come in at the top-end of the GBP30 million to GBP50 million projection, he said. The company still targets up to GBP200 million in savings at the end of next year. Costs for the program are unchanged, he said.

Mr. East said the Brexit vote shouldn't have a major impact on the company.

The interim dividend payment was cut to 4.6 pence from 9.27 pence in the year-prior.

Write to Robert Wall at robert.wall@wsj.com

(END) Dow Jones Newswires

July 28, 2016 03:58 ET (07:58 GMT)

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