Company Overview: Rolls-Royce Dividend & Schroders’ Troubles

Rolls-Royce (RR.) Shareholders were cheered by news that the company would reinstate its dividend when it publishes its full annual report. It has not paid a dividend since 2020, but payouts will return as CEO Tufan Erginbilgiç’s turnaround plan gains momentum.

Rolls reported a doubling of operating profit in the first half of the year to £1.6bn, with the improvements attributed to its transformation plan and the reversal of £545m of a previous impairment charge on its civil aviation programme.

Revenue rose 19 percent. All three main divisions showed improvements, but were led by the civil aerospace sector, which reported increases in both new engine deliveries and aftermarket revenues. Full-year forecasts for operating profit and free cash flow were both raised from at least £1.7 billion to at least £2.1 billion, and the company’s shares rose 10 percent. MF

Read more: Can Rolls-Royce shares hold their ground?

Schroders underperforms as acquisitions fail to deliver desired results

The market was not convinced by the interim results of the gilded asset manager Schröders (SDR). Clear evidence of weak flows and associated costs offset any positive news regarding the company’s new private markets joint venture with insurance company Phoenix (PHNX)Shares fell 6 percent in early trading.

The group’s total AUM was £774bn. Wealth management was the best performer with net inflows of £3.7bn. In asset management, the loss of at least one large client mandate in its solutions business partly explained the £7.6bn outflow. The resulting fall in fees meant operating profit of £315m was significantly short of the market consensus of £341m for half.

Analysts were generally disappointed with the performance. Rae Maile of Panmure Liberum said: “Recent acquisitions have not delivered; the costs are too high. The next CEO will have a job to do, but after many years of disappointing share prices, they will also have a chance to make a more sober assessment of positioning, progress and opportunities.” JH

BAE Systems gains more ground

BAE systems (BA.) reported a healthy set of first-half numbers, in line with analyst expectations, with revenue up 13 percent and underlying operating profit up 11 percent.

Although not as strong as last year, the order book size increased by more than £4 billion to £74.1 billion on the back of £15 billion in orders.

Full-year forecasts for sales, underlying profits and free cash flow were all raised, with the latter now expected to be at least £1.5bn, but the shares were flat in early trading. They are up 17 per cent since the start of the year and almost 40 per cent in the past 12 months. MF

Read More: The Growing Defensive Stocks You’ve Never Heard Of

London Stock Exchange rises on higher subscription revenues

London Stock Exchange Group (LSEG) enjoyed a decent half as the company, which is primarily a provider of financial data and analytics, saw subscription growth of 6.4 percent with signs that this had accelerated over the course of the half. The market welcomed the results, with shares rising 3 percent in early trading.

The resulting 5 percent increase in revenue flowed directly to the bottom line, with LSEG saying operating profit had risen to £1.56 billion, compared with £1.43 billion in 2023; this was just above the market consensus expectation of £1.53 billion. The high operational gearing of the business model was clearly visible in the 29 percent increase in free cash flow to £761 million.

CEO David Schwimmer confirmed that the long-awaited partnership with Microsoft is on track: “Our partnership with Microsoft is nearing commercialization, with the first product expected to be more broadly available by the end of the year.” JH

Dowlais lets hydrogen escape

Automotive Technology Group Dowlais (DWL) has sold its hydrogen business, which made hydrogen and electricity storage units. The business had just started generating meaningful revenue, with a turnover of £5m last year, although it reported an operating loss of £15m at this point.

The company has been bought by family-owned Langley Holdings. Terms were not disclosed, but RBC Capital analyst Mark Fielding argued the sale should be positive for the company’s earnings and simplify its business. MF