Rolls-Royce Profit Falls 12% As Dividend Cut
Rolls-Royce has cut its final dividend for the first time in almost a quarter of a century blaming "near-term pressure on cash flow".
Its final dividend will be halved to just to 7.1 pence per share as underlying profit before tax falls 12% to £1.4bn. This is the first dividend cut since 1992.
The Derby-based firm also said it wants to make efficiency savings of up to £200m a year but failed to mention whether this would result in job losses.
Shares (Berlin: DI6.BE - news) in Rolls-Royce had fallen by nearly 40% over the last 12 months following five profit warnings in the last two years, but rallied strongly this morning - climbing nearly by 16%.
In November, shares in the company plummeted by a fifth following news that the firm's dividend would be reduced, so today's announcement is unlikely to supervise investors.
Rolls-Royce's marine division seems to be facing the toughest challenges. Its revenues have fallen 16% prompting a 94% fall in profits.
The marine division is especially exposed to the health of the offshore oil and gas industry which has been battered by recent falls in the price of oil. As a result, 2016 is expected to be tough.
Rolls-Royce boss Warren East said: "Despite steady market conditions for most of our businesses it will be a challenging year," but added "we have made a good start to the journey that will return the company to profitable growth".
The success of the 'journey' will be reliant on continued orders. Earlier this month Airshuttle, the Norwegian budget airline, ordered £1.9bn of engines (Other OTC: UBGXF - news) .