Rolls-Royce shares dive after profit warning

Shares in aerospace manufacturer Rolls-Royce were down by nearly a tenth after the firm warned on Monday it would not meet profit expectations.

At 09:38 on Monday shares had fallen 9% to 779.47p after opening at 774p.

Rolls Royce said in an update it expected full-year profit to be between £1.325m-£1.475m, compared to previous guidance of £1.4m-£1.55m and £1,617m the previous year.

Accendo Markets analyst Mike van Dulken said investors are declaring a lack of confidence in Rolls-Royce. He noted the unscheduled trading update was the second profit warning in six months and third in just under 18 months.

Van Dulken said unchanged revenue guidance provided little solace when cash flow expectations were cut, reduced demand would dent results for the next three years, and the company’s first ever share buyback had been abandoned.

Hargraves Lonsdown analyst Keith Bowman suggested in a note to clients new chief executive Warren East may be attempting to clear the decks moving forward.

“For now, despite management changes and a still sizeable order book, current consensus analyst opinion of a hold is likely to come under further downward pressure,” Bowman said.

Rolls-Royce had said while guidance for its civil aerospace division remained unchanged for 2015, it expected offshore markets to weaken marine profits.

Rolls-Royce indicated it would report a £390m and £430m half year pre-tax profit when it provides interim results later in July.
East said he was disappointed in the announcement but noted the company had managed the important transition from the Trent 700 engine to the new Trent 7000.

“Our marine business needs to overcome its offshore market headwinds and rebuild a consistent trend of improving revenues and margins," East said in a statement.

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