For the first time in almost 25 years Rollls-Royce has cut its dividend payment to shareholders and has warned of further job cuts to come.
While analysts had expected a 30% reduction, the final dividend payment to investors has been slashed by 50%, to 7.1p a share.
There was a jump 13% in the share prices of the company as the engineering group had not issued another profits warning. However there has been a 50% decrease in the share value over the past two years.
“The unchanged 2016 guidance should help stop the rot in sentiment. The 50% cut in the final dividend is a painful step, but Rolls makes a fairly clear commitment to a progressive dividend policy,” said Sandy Morris, analyst at the company’s house broker Jefferies.
Pension funds, which are among the biggest shareholders in the FTSE 100 company would be the worst hit by the dividend cut. It is the first dividend reduction since 1992, when the UK was mired in a long-running recession.
Five profit warnings have been issued in less than two years by the engineering group which makes engines for Boeing’s 787 Dreamliners and Airbus’s A380 superjumbos.
Even as the the chief executive, Warren East, flagged up another “challenging year”, there were apprehensions of a sixth warning by him.
The company recognised the importance of paying a “healthy” dividend to shareholders, East added.
“Subject to short-term cash needs, we intend to review the payment so that it will be rebuilt over time to an appropriate level,” he said.
There was no need for a rights issue to shore up the firm’s finances, said its finance director, David Smith.
From £1.6bn, the underlying profits for 2015 fell 12%, to £1.4bn. in 2016, Rolls expects to post an underlying pretax profit of £664m along with restructuring charges that will be £75m - £100m for the year.
With further cuts planed, 50 of its top 200 senior managers were retrenched last year in an effort by the troubled engineering company at revamping its operations and slashing costs by £150m - £200m a year. Last year, the company had announced 3,600 redundancies.
After it rolled out new aircraft engines, such as the Trent XWB, 1000 and 7000, the company highlighted 4% growth in its order book and said that it was confident of increasing its share of the civil aerospace market.
Cuts in defense spending, falling demand for corporate jets in emerging markets and plunging oil prices, which have led its energy customers cutting back have hit Rolls Royce hard.
“In the context of challenging trading conditions our overall performance for the year was in line with the expectations we set out in July 2015. It was a year of considerable change for Rolls-Royce: in our management, in some market conditions and in our near-term outlook,” East said.
“Our outlook for 2016 is unchanged; despite steady market conditions for most of our businesses it will be a challenging year as we start to transition products and sustain investment in civil aerospace and tackle weak offshore markets in marine,” East added.
(Source:www.theguardian.com)
While analysts had expected a 30% reduction, the final dividend payment to investors has been slashed by 50%, to 7.1p a share.
There was a jump 13% in the share prices of the company as the engineering group had not issued another profits warning. However there has been a 50% decrease in the share value over the past two years.
“The unchanged 2016 guidance should help stop the rot in sentiment. The 50% cut in the final dividend is a painful step, but Rolls makes a fairly clear commitment to a progressive dividend policy,” said Sandy Morris, analyst at the company’s house broker Jefferies.
Pension funds, which are among the biggest shareholders in the FTSE 100 company would be the worst hit by the dividend cut. It is the first dividend reduction since 1992, when the UK was mired in a long-running recession.
Five profit warnings have been issued in less than two years by the engineering group which makes engines for Boeing’s 787 Dreamliners and Airbus’s A380 superjumbos.
Even as the the chief executive, Warren East, flagged up another “challenging year”, there were apprehensions of a sixth warning by him.
The company recognised the importance of paying a “healthy” dividend to shareholders, East added.
“Subject to short-term cash needs, we intend to review the payment so that it will be rebuilt over time to an appropriate level,” he said.
There was no need for a rights issue to shore up the firm’s finances, said its finance director, David Smith.
From £1.6bn, the underlying profits for 2015 fell 12%, to £1.4bn. in 2016, Rolls expects to post an underlying pretax profit of £664m along with restructuring charges that will be £75m - £100m for the year.
With further cuts planed, 50 of its top 200 senior managers were retrenched last year in an effort by the troubled engineering company at revamping its operations and slashing costs by £150m - £200m a year. Last year, the company had announced 3,600 redundancies.
After it rolled out new aircraft engines, such as the Trent XWB, 1000 and 7000, the company highlighted 4% growth in its order book and said that it was confident of increasing its share of the civil aerospace market.
Cuts in defense spending, falling demand for corporate jets in emerging markets and plunging oil prices, which have led its energy customers cutting back have hit Rolls Royce hard.
“In the context of challenging trading conditions our overall performance for the year was in line with the expectations we set out in July 2015. It was a year of considerable change for Rolls-Royce: in our management, in some market conditions and in our near-term outlook,” East said.
“Our outlook for 2016 is unchanged; despite steady market conditions for most of our businesses it will be a challenging year as we start to transition products and sustain investment in civil aerospace and tackle weak offshore markets in marine,” East added.
(Source:www.theguardian.com)