Shares in Rolls-Royce (RR.) were marked up slightly on release of predictably sluggish sales figures at the half-year mark. With the share price down 30 per cent over the past 12 months on a string of profit warnings, any positive signs will be welcomed by new chief executive Warren East.
Gross profits came in at £1.27bn, a 6 per cent decline on the corresponding period in 2014. The group has been struggling in the face of faltering marine-engine sales and a drop in demand for Airbus A330 jetliner engines that will continue to weigh on earnings in the near term. Investors will also be concerned over a possible margin squeeze in the early phases of the group's transition towards the production of new, more fuel-efficient engines such as the Trent XWB.
Rolls-Royce is already cutting job numbers at its aerospace and marine arms in response to the slowdown. And one of Warren East's first moves in the hot seat was to can a proposed share buy-back to preserve cash. It's easy to see why: the group has moved from a net cash to a net debt position since the year-end, while recording a free cash outflow of £576m for the period, against £247m a year earlier.
JPMorgan Cazenove reduced its adjusted EPS forecast for 2015 from 61.4p to 57.3p in the wake of the July profits warning.
| ROLLS-ROYCE (RR.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 747p | MARKET VALUE: | £13.7bn | |
| TOUCH: | 745-748p | 12-MONTH HIGH: | 1,061p | LOW: 718p |
| DIVIDEND YIELD: | 3.1% | PE RATIO: | NA | |
| NET ASSET VALUE: | 294p* | NET DEBT: | 12% | |
| Half-year to 30 June | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | † Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 6.25 | 713 | 28.9 | 9.00 |
| 2015 | 6.37 | 310 | 19.5 | 9.27 |
| % change | +2 | -57 | -32 | +3 |
Ex-div: 22 Oct Payment: 4 Jan *Includes intangible assets of £4.5bn, or 243p a share. † Dividends paid by way of C Shares, which will be issued on 4 January and redeemed for cash on 6 January. | ||||
