UPDATE 1-Rolls-Royce moves focus to costs after profit rise
LONDON, July 25 (Reuters) - Britain's Rolls-Royce beat expectations with a 34 percent rise in first half profit but said it wanted to improve its performance on costs, which it said were rising faster than revenues.
Rolls, the world's second-largest maker of aircraft engines behind U.S. group General Electric, on Thursday posted an underlying pretax profit of 840 million pounds ($1.29 billion) in the six months to the end of June, ahead of an average analyst forecast of 831.7 million pounds, according to a Thomson Reuters data.
Revenues rose 27 percent to 7.3 billion pounds.
"While underlying profits were up 34 percent, primarily reflecting volume and the benefit from the IAE (engine alliance) restructuring, it is clear we have a lot more to do on cost and cash," said chief executive John Rishton.
Rishton added that the level of cash outflow - 461 million pound in the first half - was "unacceptable". Costs were rising faster than revenues, he added.
Rolls lagged its major competitors in terms of managing costs and wanted to narrow that gap, said Rishton.
The company increased the interim dividend by 13 percent to 8.6 pence per share. Its order book rose 15 percent to 69.2 billion pounds.
Rolls, which has assumed management control of German engine maker Tognum two years after buying it, maintained its full year guidance.
It is expected to report a 2013 pretax profit of between 1.42 billion and 1.85 billion pounds, with the average standing at 1.73 billion pounds, according to a Thomson Reuters poll.
Rolls is engaged in an ongoing review of compliance procedures after Britain's Serious Fraud Office (SFO) launched an investigation into claims that Rolls representatives paid bribes to win airline engine contracts in Asia.
Shares in Rolls-Royce, which have risen 37 percent so far this year, closed at 1180 pence on Wednesday, valuing the firm at around 22.3 billion pounds.