Now I can keep an eye on one of my monitored stocks which I'm currently in.

Tenuous, but a possible benefit?

Emirates Will Buy 100 More A380s If Airbus Upgrades Model

Full Year 2014 Final Results

Group Highlights

· Record order book £73.7 billion
· Underlying revenue and profit in line with guidance
· Free cash flow £254 million (£447 million excluding the divested Energy business)
· Reported profit before tax £67 million
· Concluded the sale of the Energy business and began a £1 billion share buyback with the proceeds
· Delivered the first Trent XWB engines for launch customer Qatar Airways
· Secured an exclusive position to power the Airbus A330neo
· Launched new family of medium-speed reciprocating engines
· Payment to shareholders 23.1 pence per share, up 5%

Rolls-Royce issues mixed trading update

StockMarketWire.com

Rolls-Royce said overall, performance for 2015 for the bulk of its business is expected to be broadly in line with previous guidance. However, further deterioration in the offshore market is now expected to impact full year profit for Marine.

Guidance for 2015 revenue is unchanged for the full year. Group underlying profit before tax is now expected to be between £1,325m to £1,475m, compared to previous guidance of £1,400m to £1,550m, reflecting the deterioration in offshore.

Free cash flow for 2015 is now expected to be between £(150)m and £150m, compared to previous guidance of between £50m and £350m. Given the weaker near-term cash outlook, we will discontinue the current share buyback programme, having completed £500m of the planned £1bn programme in the first half of the year.

In Civil Aerospace, we continue to expect 2015 underlying revenue and profit within the guided range provided in February of £7,000m to £7,300m and £800m to £900m respectively.

However, we now expect the impact of reduced Trent 700 deliveries to be greater than initial estimates, reflecting further adverse developments in the demand for OE and spare engines and related pricing.

In addition, lower-than-expected demand for engines to power business jets and a softening regional aftermarket will also adversely impact profit.

These market headwinds should be balanced by good growth in our widebody aftermarket and a larger-than-expected benefit from the reversal of a balance sheet provision on the Trent 1000 launch, as a result of an expected significant improvement in operating performance, and by improved retrospective TotalCare contract profitability. The value of the provision release and contract profitability are expected together to contribute around £200m, somewhat more than previously expected.

"We now expect our Marine underlying profit to be between break even and £40m, compared to previous guidance of between £90m and £120m. We are reviewing further cost reduction and restructuring activities in Marine to improve performance which, including asset impairments, is expected to result in an exceptional charge of £70m to £100m which will be recognised outside underlying profit."

2015 Half Year

"As outlined in May, we continue to expect 2015 underlying profit before tax to be phased more to the second half than in 2014, led principally by Civil Aerospace and Power Systems. As a result, first half underlying profit before tax is expected to be between £390m and £430m, or around 30% of the full year, compared with roughly 40% in 2014. Free cash flow is expected to be between £(570)m to £(620)m compared with £(347)m in the first half of 2014.

"We will provide full details of our Interim results on 30 July."

Implications for 2016

"Taken together, the recent changes in demand and pricing for our Trent 700 programme, which is transitioning to Trent 7000, combined with the reduced demand for our business jet engines and a softer regional aftermarket, are expected to create a £300m net Civil Aerospace profit headwind into 2016.

"An improving large engine aftermarket, led by our higher installed base, and the net £90m benefit of restructuring should largely offset the likely lower level of TotalCare and other adjustments in 2016. Many of the changes will not impact cash flows and as a result cash conversion is expected to improve."

Looking Further Ahead

"The successful roll-out of new engines, led in particular by the Trent XWB, 1000 and 7000, together with a growing aftermarket, is expected to drive significant revenue growth over the next ten years as we build toward a 50% share of the installed wide-bodied passenger market.

"While the impact of the transition to the Trent 7000 has reduced Trent 700 deliveries, and held back Civil Aerospace profit in the near term, we are confident that the important investments we are making to transition our production will create a strong platform to drive customer service, improved margins and strong cash flows.

"In addition, initiatives to reduce cost and increase focus within the Marine and Power Systems businesses should help drive good performance improvements and support a growing profit contribution from our Land & Sea division as the company continues to reinforce its role as a leading provider of Better Power for a Changing World."





Story provided by StockMarketWire.com

Cue skinny with his fishing rod? I'm tempted, but not yet. Watching. :0)

Out most of the day, murphys law would have been a good day trade nice bounce back, sustainable? remains to be seen.

RBC summary note today:
"Profit cut 5% in 2015: Rolls-Royce has cut its underlying profit forecast for 2015 by 5% from £1,400-1,550m to £1,325-1,475m. Expectations for Marine have once again been reduced due to weakness in offshore (going from underlying £90-120m to £0-40m), but the company also noted that civil aerospace is seeing pressures in Trent 700 (greater impact to demand/pricing as transition to Trent 7000), business jet (lower OE demand) and regional jet (aftermarket softness). However, these pressures in civil aero are expected to be offset by higher-than-expected benefits from contract provision releases and widebody aftermarket growth (~£200m benefit in 2015 from Trent 1000 provision reversal and retrospective TotalCare profitability improvements). While underlying profit has been cut ~£75m, the company did cut FCF by ~£200m from £50-350m to £(150)-150m, and said it will discontinue its current share buyback program (has completed £500m of the planned £1B in the first half of the year).

Bigger headwinds in 2016: Rolls-Rocye noted that it expects net headwinds in Civil Aerospace ~£300m due to Trent 700 (~£250m), business jet and regional jet aftermarket weakness (~£50m), and that Marine is expected to be impacted by ~£85m again.

OUR VIEW: We think many investors had been expecting some sort of negative revision from Rolls’ new management. Our meeting with the CFO at the Paris Airshow had flagged a number of these issues, particularly the A330/A350 transition on the Trent, and the recent weakness in the share price has probably pre-empted this announcement. However, new CEO Warren East has moved quicker than we had expected to clear the decks, and re-base expectations for the known headwinds in Civil, and the market driven issues in Marine. With a soft start to the year in Power, that still leaves a lot to do in that division for the full year. This is Rolls’ third profit warning in the last 18 months – and whilst perhaps contradictory to class bad news as good news, this could help remove a major overhang for the stock."

Investec Sell 772.75 960.00 650.00 Downgrades

Espirito Santo Execution Noble Neutral 772.75 1,160.00 845.00 Downgrades

Societe Generale Sell 772.75 850.00 675.00 Retains

RBC Capital Markets Sector Performer 772.75 1,060.00 850.00 Reiterates

JP Morgan Cazenove Underweight 772.75 900.00 640.00 Downgrades

Panmure Gordon Sell 772.75 744.00 600.00 Retains

Liberum Capital Hold 772.75 900.00 - Reiterates

More from RBC today:
"Could Rolls be a target? Given its installed base and backlog, the long term prospects for the company look attractive. However, with its medium term profit and cash challenges, the question has been raised as to whether Rolls could be an acquisition target. We think suggestions that United Technologies could be interested are baseless. New management at UTX have made it clear that they are looking for smaller targets, and Rolls would double up their aero engine risk when P+W is going through similar transition issues on the GTF. Another suggested acquirer is Siemens, though we’re not sure their shareholders would be thrilled. Given that the UK Government would be intimately involved, an acquisition could have more risk than appreciated.
EPS and target price: We’ve cut our 2015 EPS estimate from 62p to 57p, and 2016 goes from 67p to 49p. We’ve rolled our target price basis to a 2016/17 blend (which was already scheduled for 1H15 results), and this results in our target price moving from 1060p to 850p. This implies a target multiple of ~16x P/E.
Limited downside, but tough to see the upside: Although we think this update has removed an overhang that has been weighing on the Rolls stock price, the revised financial forecasts leave Rolls looking relatively expensive versus peers (16.5x 2016 P/E on our new estimates, versus EU aero average of 15.1x). Assuming that new management has ‘kitchen sinked’ the forecast, we would expect limited downside to estimates from here. However, it’s hard to see much upside in 2016–17 given the long term nature of the Civil and Defense businesses, unless there is a notable uptick in shorter cycle areas like Power, Marine or the T+M aero aftermarket. We therefore remain Sector Perform on the stock at this point."

Investec summary:
"Medium-term headwinds to profitability are more substantial than we expected and risk to profits and cash remains skewed to the downside. The mismatch between underlying profit and FCF over the coming years will continue to raise questions on the quality of earnings. Rolls’ long-term prospects remain attractive, but have been deferred (again) to the end of the decade and investors should wait until consensus and valuation reflect both long-term upside and medium-term risks. Downgrade to Sell with a 650p TP.
Updating forecasts post 6th July profit warning: We reduce our FY15E EBIT forecasts by c.7% and FY16E-18E EBIT forecasts by c.27%-35% to reflect: (1) Larger than expected Civil Aerospace losses related to the transition between the Trent 700 (A330ceo) to Trent 7000 (A330neo); (2) Lower Regional and Business Jet revenues and profits from OE and aftermarket; and (3) Sustained weakness in Marine.
Additional headwinds to medium-term profitability: We believe guidance does not reflect the possible launch of the A380neo that would present a material headwind to medium-term profits. Increasing pricing pressure across the business, defence budget uncertainty, margin pressures and industrial end market weakness could lead to further downgrades.
A strategic and operational review: Incoming CEO Warren East has launched an operational review of Rolls’ businesses. We believe this should include a review of Rolls’ strategy to become a diversified industrial company, as discussed in our note A time for reflection (14 November 2014).

We reduce our DCF-derived TP to 650p to reflect our new forecasts and move to Sell. At our TP, Rolls would trade on a FY16 PER of 14.9x (FY17E: 14.7x). Potential risks to our cautious view include strong growth in AM driven by low oil prices, an earlier than expected recovery in industrial end markets and a possible bid for the company following the recent decline in the shares."

Deutsche Bank Sell 758.50 758.50 610.00 580.00 Reiterates

...........a once great company going to the dogs. IMO RR strategy has too much over-reach and fails to concentrate on core strengths. Competition tend to focus on their core business soaking up market share in a highly competitive market, especially when passing out of recession.

Cannot see RR SP heading north any time soon, but continuing to slowly head south as profits drop and operating costs deplete company value. Perhaps small recompense will come from cost cutting / staff redundancies and non-core sell-offs, but will be short lived and turn around difficult.

Unfortunately, medium term outlook for RR IMO will be takeover target from bigger player, with a focused and more established product competencies profile; where RR assets would complement their own business.

Henry Royce and Charles Rolls would be beside themselves IMHO.

DYOR
HAb

RR. says 2015 broadly in line, sees 2016 challenge

StockMarketWire.com

Rolls-Royce said while 2015 remains broadly as expected, the group's outlook for 2016 is very challenging. It described Q3 trading as satisfactory, despite a mixed operating performance in several markets. Its overall performance expectations for 2015 are unchanged.

"Overall performance expectations for 2015 remain unchanged, although there have been developments in aerospace and marine markets that have created additional headwinds," the company said.

"For 2015, these should be largely mitigated by a number of positive developments, including cost saving measures; however the headwinds are likely to impact 2016 more than previously expected," it said.

"Compared to the expected outturn in 2015, the key areas of demand weakness are affecting selected aerospace and offshore marine markets.

"In aerospace, these mainly relate to the themes emerging in the third quarter, including sharply lower volumes of corporate jets powered by Rolls-Royce engines, further weakness in demand for corporate jet aftermarket services, further significant declines in aftermarket service demand for our engines on 50-70 seat regional jets and more conservative assumptions on demand reductions for some legacy programmes.

"Together, these impacts on our corporate and regional business account for roughly £100m of our incremental profit headwind.

"Expected demand for new wide-bodied engines remains unchanged from that set out in the summer. Rolls-Royce continues to gain market share in installed thrust and as a result, we should benefit from increased demand in the year for our aftermarket services.

"However, we have begun to see reduced utilisation by some specific operators of older wide-bodied engines. This management of short-term excess capacity, as the market takes delivery of newer, more fuel efficient airplanes, is already starting to impact aftermarket revenue and profit.

"Together with other changes, the incremental profit headwinds for our wide-bodied engine business are expected to be roughly £100-150m.

"In addition, offshore marine markets have continued to deteriorate throughout the year and, as a result, 2016 forecasts have weakened further. As a result, we are setting expectations to reflect a further 15-20% decline in offshore marine market demand, weakening marine profit by a further £75-100m.

"Our preliminary view on 2016 is materially impacted by these new headwinds, together with the changes in demand outlined in our 6 July 2015 update and repeated in our half year results on 30 July 2015.

"These included around £250m of profit headwinds related to lowered volume and pricing expectations for our Trent 700 programme, which are unchanged, combined with a further £50m related to our corporate jet and regional aftermarket businesses, both of which have since weakened further.

"As a result, expectations are that profit headwinds may be around £650m compared to 2015. Many of the headwinds impact higher than average margin segments of the business, or businesses where fixed costs are relatively high. As a result, the profit fall through is significant."

hope you're not holding RR too chris

No cynic, but certainly cheap now. May get even cheaper yet.

The UK economy is going down the drain under Cameron. The whole FTSE 100 shares are not doing well.

chuckle
the uk economy is actually amazingly robust compared to the rest of the world
it's the weakness in china that is currently giving everyone the heeby-jeebies

discussing about weakness is causing problem more than the weakness itself. I think Chinese like the western media as they are expanding while everything is cheap

Their internal economy is doing fine. Just check the number of Chinese travelling to UK and other countries.

Australia is considering limiting the number of visitors as they have difficulty to cope.

Back at 2011 levels. Triple bottom possible but don't hold your breath.

Jefferies note today (House broker):
The underlying profit warning for FY16 – likely down around 30% versus company-sourced consensus – is too great for us to believe anything else will count today. Nonetheless, FY16 cash flow is largely unchanged and some bad news on profits has probably arrived today rather than over a period of years. The equity story is dented, but still stands, in our view. If the negative sentiment quickly exhausts itself, there could be more to play for on 24 November.
Trading update in brief.
FY15 outlook is fine, albeit at the low end of guidance (so PBT nearer £1,325m versus Consensus £1,336m and JEFe £1,324m). The FY16 headwinds are now up to £650m, up from £300m at the 1H15 stage, with an additional £75-100m from Marine, £100m from Corporate/Regional, £100-150m from wide-body aftermarket.
Consensus FY16 PBT is £1,053m (JEFe £956m), so a £300-350m reduction equates to around 30%. There is also a shot across the bows on the dividend, which will be “reviewed” by the Board. That adds an air of gravity to the IMS, but against the backdrop of a “new wide-ranging restructuring programme” that targets gross cost savings of £150-200m per annum, with benefits accruing from FY17 onwards.
Trent aftermarket.
On 22 August 1991, British Airways chose GE90 engines to power its B777 aircraft. It was a dark day; darker than this one. On 15 November 1995, Singapore Airlines ordered Trent 800 engines to power its B777s and the darkness was finally banished. Today, the mist descends again as the Singapore B777s have all been retired and are probably inactive. We knew RR’s data for its installed base included such aircraft, so we knew that aftermarket revenues must have been impacted already to some degree. We believe the same applies to the Trent 500 (A340-500/600) and even to the Trent 700, albeit to a lesser extent. In our forecasts, we simply predicted these engines would steadily leave the installed base and so moderated our TotalCare revenue and EBIT forecasts accordingly. That is our context for today’s caution on the Trent aftermarket – the bad news has come forward as RR manages aircraft/engines that are on the frontier in terms of whether or not they remain in service. There may be some enduring impact on our forecasts for, say, FY18 and FY19, but we doubt it will be material. It is an unwelcome development as to timing and might appear to threaten the equity story, but that is not the case, in our view.
Marine – weak at the knees.
With hindsight, we understand that Marine was flawed in many respects – lack of new product development, too disparate, and largely based in high- cost countries – but was supported by the strength of its major end market, offshore oil & gas. We had aimed low for FY16 (EBIT breakeven), but not low enough. Yesterday, Farstad Shipping referred to pressure on rates, surplus tonnage (despite vessels being stacked) and new vessels remaining on order. We had hoped for relative stability by now, but Farstad predicted no improvement in FY16. As a result, the outlook for services remains bleak and that for new OE orders desolate. The only consolation is that RR’s FY16 cash flow guidance suggests Marine will no longer be haemorrhaging cash.
Red Line.
We harbour no illusions about what could unfold today – the scale of the downgrade for FY16 is too great to be treated with equanimity. We have, however, already set out our stall on cash flows, not profits, so the relatively robust FY16 cash flow (Consensus FCF £44m) is some solace and likewise the new management team stamping its authority on things through a more profound restructuring. Like the 6 July trading update, today we have profits down and cash much less impacted. When calm returns, that may cause the focus to shift from profits to cash flows We believe RR will live to fight another day – 24 November being a start. We believe the RR equity story is dented, but largely intact on a medium-term view."