Rolls Royce shifts gear to improvement

As Rolls Royce updates the market, Graham Spooner, investment research analyst at The Share Centre, explains what it means for investors

Rolls Royce shifts gear to improvement

British engineering company Rolls Royce reported a reassuring set of results this morning that confirmed its trading outlook for full year was unchanged.

The group stated that its turnaround plan would mean cost cutting measures would be at the top end of guidance and it expects improvements in profits in the second half. The market reacted positively with the comments, demonstrated by shares being up 8% in early morning trading.

Interested investors will be fully aware that there have been a number of profit warnings in recent years. Indeed the company shocked investors when it warned 2016 profit would halve due to cancelled orders from oil industry customers, and a slowdown in demand for the high-margin aftermarket servicing it provides for older aircraft engines.

Investors will therefore be hoping that management measures will put the company back on a firmer footing.

In the meantime however, it is worth pointing out that its order intake has been good and its long-term outlook remains strong, driven by a pick-up in large aero-engine deliveries. This in turn should help improve profits and cash generation

Year to date, the shares are up approximately 40% and at present they are back up to the level seen one year ago.

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