FTSE 100 movers: Rolls-Royce tumbles on profit warning, but BAE systems jumps

London’s FTSE 100 index was down 1.5% to 6,204.27 at 1435 GMT as huge losses for Rolls-Royce weighed on the index.

Shares in Rolls-Royce Royce tanked after the aerospace and engineering firm said earnings for the year will be at the low end of guidance as it downgraded its expectations for next year and warned of a possible cut to the dividend. The company reaffirmed its 2015 guidance but said profit for the year is expected to be at the lower of the range of its £1.33bn to £1.48bn range. In addition, it said profit headwinds next year could be around £650m compared to 2015.

In its fourth profit warning in just over a year, the company said many of the headwinds impact higher than average margin segments of the business, or businesses where fixed costs are relatively high. As a result, the profit fall through is significant.

Education publisher Pearson was also under the cosh following comments by chief executive officer John Fallon the previous day. Speaking at the Morgan Stanley European Technology, Media and Telecom Conference in Barcelona on Wednesday, Fallon said that when considering a capital allocation, the company’s first priority was to protect the dividend.

Pearson also said it expects total US college enrolments to shrink by around 2% this year.

Shares in the company fell further on Thursday after Bloomberg quoted Peel Hunt analyst Alex De Groote as saying that he expects Pearson to issue another profit warning in the next few weeks and then to cut the dividend.

The news weighed on peers GKN and Meggitt, whose shares were also in the red.

Miners were on the back foot, with Glencore, Anglo American and Antofagasta all sharply lower as metals prices declined amid renewed concerns over China.

British Airways and Iberia parent International Consolidated Airlines Group was lower after it announced plans to sell €1bn of convertible bonds to help repay a bridge facility it entered into to finance the acquisition of Aer Lingus.

On the upside, BAE Systems was the standout gainer as investors welcomed the military hardware maker’s plans to axe 371 jobs at its military aircraft unit. The company said it was slashing the jobs and slowing the production rate of its Typhoon fighter jet “to ensure production continuity at competitive costs over the medium term”.

FTSE 100 - Risers

BAE Systems (BA.) 460.00p 4.95%
BT Group (BT.A) 483.45p 1.68%
National Grid (NG.) 921.00p 1.57%
TUI AG Reg Shs (DI) (TUI) 1,184.00p 1.11%
United Utilities Group (UU.) 948.50p 1.07%
Severn Trent (SVT) 2,166.00p 0.93%
Direct Line Insurance Group (DLG) 404.60p 0.92%
SSE (SSE) 1,457.00p 0.90%
Diageo (DGE) 1,912.00p 0.66%
Sage Group (SGE) 542.00p 0.65%

FTSE 100 - Fallers

Rolls-Royce Holdings (RR.) 529.50p -20.61%
Glencore (GLEN) 90.92p -12.45%
Anglo American (AAL) 448.00p -9.08%
GKN (GKN) 276.80p -4.85%
Pearson (PSON) 782.50p -4.46%
Smiths Group (SMIN) 941.50p -4.32%
Meggitt (MGGT) 367.40p -4.12%
BHP Billiton (BLT) 886.50p -4.03%
Antofagasta (ANTO) 485.40p -3.98%
Johnson Matthey (JMAT) 2,466.00p -3.41%