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Rolls-Royce stock flying high even as it halves share dividend

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By Euronews  with Reuters
Rolls-Royce stock flying high even as it halves share dividend

<p>Rolls-Royce was flying high on the London stock market on Friday even though it <a href="http://www.rolls-royce.com/investors/results-centre/all-results-and-updates/yr-2015.aspx">announced its profit for all of last year slid 16 percent</a> due to a slowdown in demand for some of its engines.</p> <p>The company also warned of continued tough trading for its aircraft and marine engine businesses.</p> <p>However the share price surged 17 percent on Friday after Rolls kept its forecast for earnings this year unchanged. </p> <p>That was a relief to investors as the world’s second-largest maker of aircraft engines issued <a href="http://www.euronews.com/2015/11/12/weak-demand-and-headwinds-bring-another-rolls-royce-profit-warning/">three profit warnings</a> last year.</p> <p>They also approved of the company’s move to strengthen its finances by halving the dividend it pays to shareholders. </p> <p><a href="http://www.rolls-royce.com/about/who-we-are/executive-leadership-team/elt-warren-east-cbe.aspx">Chief Executive Warren East</a> had said in November that further profit warnings could not be ruled out but he stuck to previous 2016 guidance on Friday despite the bigger-than-expected dividend cut. </p> <p>The company said it would pay shareholders a final dividend of 7.1 pence per share compared with the 14.1 pence it paid out last year. It is also halving the interim payout for 2016.</p> <p>East, who became <span class="caps">CEO</span> last year, is trying to convince investors that his <a href="http://www.ft.com/intl/cms/s/0/2fd9ae9c-92be-11e5-94e6-c5413829caa5.html#axzz3zxdz08CC">plan to cut costs and simplify Rolls-Royce</a> will return the company to growth after two years of decline.</p> <p>The company has yet to say, however, when it will start growing again, although <span class="caps">CFO</span> David Smith hinted that the turnaround was underway.</p> <p>“In my view, 2016 is where we start transitioning from dealing with a lot of legacy issues to getting ahead of the curve,” he told an investor meeting.</p>