The market is still not fully convinced by the turnaround at Rolls-Royce (RR.) despite guidance on full year numbers being maintained and the company confirming it is on track to achieve cost savings of £150m to £200m.
A mixed trading update accompanies an investor day where chief executive Warren East outlined his vision for the company, the shares are currently down 1.5% to 743.5p.
The specialist engineer warns the outlook for its power systems market is mixed due to soft demand for industrial engines and services and says it is yet to see a recovery in oil and gas markets.
Rolls-Royce is more optimistic about its civil aerospace arm due to strong demand and bumper orders for its XWB engines, although demand for business aviation original equipment has weakened. The company is also expecting its nuclear division to benefit from improved submarine activity and its outlook for defence is upbeat due to aftermarket opportunities.
AJ Bell investment director Russ Mould believes the company is making significant progres and notes the beneficiary effect from the fall in sterling.
‘The group believes foreign exchange benefits from weaker sterling and lifecycle cost reduction will more than offset higher engineering and programme costs in civil aerospace’ he says.
The engineer’s outlook for revenue, profit and cash is unchanged with free cash flow expected to be negative in the range of £100m to £300m.
In July, Rolls-Royce agreed to pay €720m to complete the takeover of Spanish aero engine components manufacturer Industria de Turbo Propulsores (ITP).
