2015 was all change year for Rolls Royce (RR.) Management, market conditions and the near term outlook all changed as the company set about trying to transform itself but the biggest transformation of all is to the final dividend which is today slashed by half. And that is not the end of the transformation. Rolls promises that the next interim dividend will also be transformed in similar fashion.
Shareholders have had a raw deal from the (mis)management of the company. Two years ago in January 2014 the shares stood at an all time high of 1275p since when they have been in virtually continuous decline until last nights close at 530p. So not only have shareholders lost half of their income, they had over the past two years also lost 60% of their capital.
In fact so dire were the expectations as to how badly Rolls had performed in 2015, that todays results, disastrous as they are, have come as something of a relief and the shares jumped this morning by over 10% to 590p.
How well or how badly Rolls has performed depends on whether you like your results fried or boiled, or in more technical terms, reported or underlying. Reported profit before tax is up by 140%. On an underlying basis it is down12%. Earnings per share are similarly , either up by 215% or down by 10%. Perfectly sensible contradictions for the number crunchers.
The order book has grown by 4%, due mainly to strong market share growth in Civil Aerospace and that just about brings the good news to an end except for something called the quality of its mission critical technology, whatever that is supposed to mean. The trading outlook for 2016 is unchanged.
Fear not however, for the company is to be transformed, (just like Hornby, another collapsing British icon) and here Rolls unwittingly provides a list of its failings (ie. the things which need transforming by the new transformation team)
Pace and simplicity are to be added, presumably to replace existing slowness and confusion. Annual cost reductions of £ 150m to £200m are to be made, without any explanation as to why management allowed costs to get so out of hand. Senior management has been reduced by 20%, again without any explanation as to why such costly overstaffing was permitted in the first place. A return is needed to profitable growth, clearly implying that previous growth has been loss making.
Even worse, although market conditions are now steady, Rolls admits that 2016 will still be a challenging year.
Meanwhile sterling continues to tumble. And one wonders why.