New Model Adviser - For Professional Investors

Register free for our breaking news email alerts with analysis and cutting edge commentary from our award winning team. Registration only takes a minute.

Rolls-Royce helps FTSE shrug off trade war fears

Rolls-Royce helps FTSE shrug off trade war fears
 

Rolls-Royce (RR) has helped the FTSE 100 buck global market falls following the resignation of Gary Cohn, US president Donald Trump's top economic adviser.

Shares in the aircraft engine maker surged 12.5% to 932.9p after it beat profit forecasts for 2017, promised further cost savings and said it was on track to meet 2020 targets.

That helped the FTSE 100 edge seven points, or 0.1%, higher to 7,154, bucking the falls seen in other global markets following the resignation of Cohn, reportedly an opponent of Trump's plans to impose tariffs on steel and aluminium imports.

Asian markets fell overnight, with Hong Kong's Hang Seng down 1% and Japan's Nikkei 225 dropping 0.8%, while France's CAC 40 opened lower, with Germany's DAX 30 flat.

Deutsche Bank's Jim Reid said Cohn's departure suggested that 'Trump is leaning heavily towards some form of protectionist measures'.

'Needless to say that Cohn's resignation also leaves further question markets around Trump's economic agenda,' he added.

But investors were buoyed by the news from Rolls-Royce, which unveiled a 25% jump in full year profits to just over £1 billion, ahead of forecasts of £878 million.

Chief executive Warren East said the company would also make efforts to make further cost savings, after shaving £200 million over two years.

'Looking at today's announcement, we sense the Rolls-Royce story is finally coming of age,' said Sandy Morris, analyst at Jefferies, who rates the shares a 'buy'.

George Salmon, equity analyst at Hargreaves Lansdown, said the performance represented a 'major coup' for chief executive Warren East.

'Cost savings have come in at the top end of guidance and there's extra efficiencies on offer from simplifying the business too,' he said.

'Add in the £500 million or so likely to come from the sale of the L'Orange fuel injection business, and it's no longer panic stations on the dividend.'

Russ Mould, investment director at AJ Bell, highlighted the improvement in the company's cash flow, up 165% in 2017. 

'The old saying about "profit is a matter of opinion but cash is a matter of fact" is one that investors should always bear in mind, as it can help them avoid potential portfolio losers and find possible winners,' he said.

'Cash pays the bills and cash funds investment in a business and its competitive position, so it is encouraging today to see cash flow improve markedly at Rolls-Royce as boss Warren East nears the end of his third year at the helm.'

On the FTSE 250, Hill & Smith (HILS) was the biggest riser, up 8.9% at £13.46, as the infrastructure products maker reported record full-year revenues and profits.

'Small-cap' stock Restaurant Group (RTN) surged, up 12% at 265.8p as the Frankie & Benny's and Chiquito owner's profits fell 26%, ahead of analysts' worst fears.

Biffa (BIFF) tumbled 11.9% to 218p as Chinese regulations continued to weigh on the waste management company.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Comment & analysis

Twitter