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

Rolls-Royce stock flying high even as it halves share dividend
By Euronews with Reuters
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Engine maker Rolls-Royce has halved its final dividend to shareholders to shore up its finances, but kept its forecast for 2016 earnings unchanged, a relief after previous profit warnings.


Rolls-Royce was flying high on the London stock market on Friday even though it announced its profit for all of last year slid 16 percent due to a slowdown in demand for some of its engines.

The company also warned of continued tough trading for its aircraft and marine engine businesses.

However the share price surged 17 percent on Friday after Rolls kept its forecast for earnings this year unchanged.

That was a relief to investors as the world’s second-largest maker of aircraft engines issued three profit warnings last year.

They also approved of the company’s move to strengthen its finances by halving the dividend it pays to shareholders.

Chief Executive Warren East 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.

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.

East, who became CEO last year, is trying to convince investors that his plan to cut costs and simplify Rolls-Royce will return the company to growth after two years of decline.

The company has yet to say, however, when it will start growing again, although CFO David Smith hinted that the turnaround was underway.

“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.

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