Charles Stanley downgrades Royal Dutch Shell to hold

Royal Dutch Shell's latest set of full-year numbers, but cash flow was weak, Charles Stanley analyst Tony Shepard said ahead of the oil major's Capital Markets Day.

The integrated oil company's ability to ring up cash for shareholders was "extremely weak", Shepard said in a research note sent to clients.

That gave the analyst cause for concern given Shell's levels of net debt and gearing were "much higher than anticipated".

Shepard admitted the recovery in the oil price was a relief, which could boost profitability in the second half of 2016.

However, the oil company needed to turnaround its cash flow and get its gearing level below 20%, he added.

With the company's Capital Markets Day on 7 June now nearly at hand, the broker downgraded its recommendation on the stock from 'buy' to 'hold'.

"Although Shell’s operational performance is improving, the higher debt suggests that the divestment plan has become more important."