Volatile trading on Rolls-Royce sees initial losses of 1.4% on Friday’s trading.
Image: © 2010 Rolls-Royce plc
As British engineering and car maker reports the first sales loss in 10 years, investors shy away.
Results for earnings came in lower than expected with sales showing an 8% fall. Sanctions on Russia were blamed alongside defense funding cuts and lower volumes and deposits in Civil, Marine, and Defence.
Chief Executive Officer John Rishton commented on the revenue problems as, “reflecting reduced spending by our defense customers, macroeconomic uncertainty and falling commodity prices.”
Other one off items all came under the company’s own estimates: Foreign exchange translation was estimated at £60m but totaled £49m for the full year. Likewise, additional restructuring was estimated at £60m but amounted to £56m.
Forecast: Net profit was expected to drop to £1.2 billion ($1.8 billion) [FactSet], compared with £1.4 billion reported the previous year. Bloomberg reported a forecast of £1.6 billion. Sales last year were expected to retreat to £14.6 billion, a 2.7% decline when stripping out foreign exchange fluctuations.
Actual: Reported revenue of £1.3736 billion down 6% from £1.4642 billion. Reported earnings per share are 3.7p down from **73.3p, a reduction of 95%. Reported profit before tax** was down 96% at £67 million down from £1,700 million. (** Represented to reflect Energy as a discontinued operation). The dividend will amount to 23.1 pence per share.
2015 is a year of job cuts and spending efficiencies. Rolls-Royce reported, “a restructuring programme in our Aerospace Division and central functions, which is expected to reduce headcount by 2,600. The programme is expected to result in restructuring charges of around £120 million, of which £56 million was recognised in our 2014 results.” Leaving an additional £64 million to find in the current year.
However, Rolls-Royce has a strong outlook for 2015, saying that “Strong growth in the demand for air travel is widely forecast and is reflected in our £63 billion Civil aerospace order book. Future growth in world trade (90% of which is carried by sea), urbanisation, population growth, and tighter environmental regulation leaves our Land & Sea Division well-positioned to meet the increasing requirements for cleaner power.”
MT4 chart: Rolls-Royce
Trade stock CFDs on STOCK.com with full training given to all clients