Rolls-Royce slashes dividend payment

Rolls-Royce, the Derby-headquartered manufacturing giant, has cut its dividend payment to shareholders in half after posting a fall in profits.

Shareholders will now only receive 7.1 pence per share after profits at the company fell from £1.62bn to £1.43bn in 2015. It will also halve again dividend payments in 2016. However, Rolls-Royce says its trading outlook for 2016 is unchanged.

In November Rolls-Royce set out on a restructuring process, and says it will save £145m by the end of 2017. In its 2015 results released today (12th February), the company said that it has reduced senior management positions by 20 per cent and further redundancies will be made this year and “in the future”.

Warren East, chief executive, said: “Our outlook for 2016 is unchanged; despite steady market conditions for most of our businesses it will be a challenging year as we start to transition products and sustain investment in Civil Aerospace and tackle weak offshore markets in Marine.

“The pace of investment required to transform the business creates near-term pressure on free cash flow. At the same time, we need to sustain a healthy balance sheet to ensure we have the financial flexibility to maintain a strong investment grade credit rating. As a result, the Board is recommending that the payment to shareholders is halved in cash terms at the full year and the next half year. We recognise the importance of a healthy ‘dividend’ to our shareholders. Subject to short-term cash needs, we intend to review the payment so that it will be rebuilt over time to an appropriate level. This reflects the Board’s long-standing confidence in the strong future cash generation of the business.

“Our strong order book continues to grow, built around market-leading products and services. This provides us with an outstanding opportunity to deliver long-term profitable growth and capture significant incremental market share. The transformation programme is now well underway. This will add pace and simplify our business, making us a more resilient company. Overall, we have made a good start to the journey that will return the company to profitable growth.”