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Rolls-Royce flies high on hopes it has outgrown profit warnings

Activist investor ValueAct has become its largest shareholder with a 10 per cent stake

Jamie Nimmo
Monday 07 December 2015 20:44 EST
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Rolls-Royce flew higher yesterday on hopes that the aircraft-engine maker could lay to rest the issues that have caused five profit warnings in just over 18 months. The manufacturing heavyweight advanced 16p or 2.7 per cent to 610.5p on reports that its senior executives will hold talks this week with activist investor ValueAct, which has become its largest shareholder with a 10 per cent stake.

The San Francisco-based firm is pushing for a seat on Rolls-Royce’s board after a disastrous six months when its share price has tanked almost 40 per cent. The latest profit warning on 12 November – when it revealed earnings this year would be £650m lower than expected – dragged the shares down by more than a fifth.

The decline in oil prices gathered pace, with fears over the length of the global oversupply triggering a 14.77-point fall for the FTSE 100 to 6,223.52.

Shell slumped 73p or 4.6 per cent to 1,526.5p; BG Group dropped 41.9p or 4.1 per cent to 983.1p; and BP fell 12.1p or 3.3 per cent to 347.6p. Miners were slammed too, with BHP Billiton down 22.5p to 765.2p and Glencore down 1.93p to 85.36p.

Tesco was among the fallers after Exane BNP Paribas painted a gloomy picture of the outlook for the “big four” supermarket groups. The broker predicted “carve-ups and disposals/closures”, with struggling Morrisons the prime candidate. Tesco plunged 5.6p to 157p as Exane slashed its target price to 195p; Sainsbury’s dropped 3.3p to 241.7p after the broker trimmed its target to 250p; while Morrisons slipped 1.9p to 145.7p with Exane’s target price 17 per cent lower at 125p. Traders stocked up on Home Retail Group, 4p richer at 110.4p, after weekend reports suggested French DIY retailer Leroy Merlin is considering a bid for its Homebase chain.

On the junior market, InternetQ recovered 12p or 19 per cent to 74p after issuing a lengthy riposte to allegations about its business. Cenkos tumbled 28.5p to 147.5p on reports it handed over documents to the Serious Fraud Office as part of its probe into Quindell, the insurance software firm advised by Cenkos.

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