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12 Feb 16. Rolls-Royce cuts dividend for first time in 24 years. Rolls-Royce is cutting its dividend for the first time in 24-years after a series of five profit warnings in two years eroded the UK engine maker’s profits and share price.
The engineer has cut the dividend even more deeply than anticipated, chopping it down to 16.4 pence for 2015, down from 21.3 pence last year. Analysts had expected a 30 per cent cut to 17p in 2016 and to 16p in 2017, writes Joel Lewin.
Rolls is also proposing to reduce its interim payment for 2016, by 50 per cent.
Underlying profit before tax fell 12 per cent last year to £1.43bn, on underlying revenue down 1 per cent to £13.4bn.
Underlying profit at the marine division was almost entirely wiped out, dropping 94 per cent to £15m. “The business is expected to be significantly loss making in 2016,” the company said.
The civil aerospace division, which accounts for more than half of the group, suffered a 14 per cent decline in underlying profit to £812m.
The shares have dropped in recent weeks as investors became increasingly wary of the impending dividend cut. Not even a $2.7bn order from budget airline Norwegian Airshuttle could stimulate a notable bounce. The shares have dropped more than 30 per cent since Warren East took over as chief executive in July. Some investors in the company have been supportive of a dividend cut, saying Rolls has “a lot to invest in” as it seeks to overhaul its operations to get its earnings back on a positive trajectory.
Last year the engineer warned it faces profit “headwinds” of £650m in 2016.
San Francisco-based activist investor ValueAct has taken a 10 per cent stake in the company and is pushing for a seat on the board. (Source: FT.com)
12 Feb 16. Earnings bolster Cisco, but raise concerns for broader IT spending. Networking giant Cisco Systems Inc reported it is weathering a global slowdown in information-technology spending, but signs potential customers are putting some projects on hold exacerbated concerns about broader IT growth.
Cisco shares rose 10 percent on Thursday, bucking the overall market after it set a profit target in line with Wall Street expectations despite the weaker spending it noted around the world by businesses. The company also cut targets three months ago, moderating Wall Street expectations.
Cisco Chief Executive Chuck Robbins on Wednesday told analysts that customers in January “paused a bit” as they evaluated the economy. Spending on key projects continued while more optional ones were put on hold.
Analysts took that as a bad sign for some technology companies.
“This was really a litmus test for all of IT spending,” said Sun Trust analyst Inder Singh about Cisco’s comments. “When they speak, and they talk about a slowdown, and a deceleration, usually it affects the broader market.” Cisco’s guidance was “prescient in terms of affecting other companies,” he added.
Cisco reported weakness in data centers and switching. Some analysts saw potential trouble for other data-center products such as networking, servers, storage, and virtualization.
Shares in storage company EMC were down 1 percent on Thursday. Shares of IBM, which makes servers and sells other related services, were down 2 percent. HP Enterprises, which sells server products, fell 5 percent in a generally weak market.
Conversely, Cisco said demand for security and next-generation data centers, which rely more heavily on software than traditional data centers, withstood the downturn. Shares of Arista Networks, which makes next-generation data center switches, showed slight gains Thursday. The company reports earnings next week.
One believer in next-generation data centers, insurance company Assured Guar