ROLLS-ROYCE HOLDINGS PLC 
LONDON (Reuters) - British group Rolls-Royce (>> Rolls-Royce Holding PLC) reported a 32 percent drop in half-year profits on Thursday but the result was slightly better than expected after the engine maker slashed its forecasts three times in the last nine months.
Rolls-Royce shocked investors earlier this month when it warned profits at its main aero engines business would falter next year, adding to declines seen in its marine division, where a lower oil price has caused a slowdown in orders from energy customers.
That warning turned up the heat for new Chief Executive Warren East, coming days after he took up the role on July 2.
Reassuring investors that there was not another downgrade to come, the company reported on Thursday an underlying pretax profit of 439 million pounds for the first six months of the year, a drop of 32 percent but beating its own forecast of 390-430 million pounds.
The company said the lower first-half profits were due to the slowdown in its marine business, a slightly higher research and development charge and the shift in mix of airliner engines it sells as sales of newer types of engine are less profitable initially but more so over the course of their service life.
Shares in Rolls-Royce, which had sunk 17 percent in the past month to hit their lowest level for over three years, were up 2 percent at 745 pence by 0937 GMT (1037 BST).
"Given the performance of the share price in July, we think the response from investors today could be one of relief - at least the situation has not got worse for Rolls," RBC analyst Robert Stallard said in a note, adding that Rolls still had a lot to do in the second half of the year to meet forecasts.
East said that for the second half the outlook was positive and that beyond that he was working to ensure the company would be able to deliver on its targets.
Having announced an operational review earlier in July, he said on Thursday that he would report his "early priorities" before the end of 2015.
East joined as shake-up plans were already underway in Rolls-Royce's marine and aerospace divisions, with plans to cut 3,200 jobs to improve profit margins.
"I am going to be working with the team to add pace and simplicity into what we're doing," he said of the restructuring.
The downgrade to its forecasts announced in July, which cut the consensus market forecast for profits next year by about 20 percent, was primarily driven by the civil aerospace division, which accounted for almost half of 2014 revenues.
That knocked confidence in a part of the business which had for years been riding a surge in demand for fuel-efficient engines for power passenger jets made by Airbus and Boeing.
Asked about a possible new aerospace project to provide an engine for a new version of the Airbus (>> Airbus Group) A380, East said Rolls-Royce hoped to provide if it could make the business case.
(Additional reporting by Paul Sandle; Editing by Kate Holton and Greg Mahlich)
By Sarah Young
