Results round-up: Rolls-Royce, TUI, Vedanta
Rolls-Royce
Rolls-Royce posted a record £4.6bn pre-tax loss but revealed a better than expected underlying profit and that efforts to cut costs as part of its transformation programme were at the top end of expectations.
For 2017 the engine maker said it expected "modest" improvement in sales and targeted free cash flow to be "similar to 2016".
The pre-tax loss, which is one of the biggest in corporate history, reflects a £671m corruption fine but more so the collapse of the pound, which led to a £4.4bn non-cash write-down of the company's derivatives contracts.
Revenue for the calendar year of £14.96bn was up 9% on a reported level, though underlying sales falling 2% to £13.78bn due to a weakness in the marine market coming from the oil-price slump.
At the underlying level profits at constant exchange rates were down 49% to £813m, with profits down in all its segments, including a 280% fall in marine and 60% for civil aerospace.
However, this was much better than the consensus £685m profit forecast by City analysts, though in early reactions there were differing opinion around whether the company had truly turned a corner.
On cost-cutting, chief executive Warren East said so far more than £60m of 'incremental in-year' costs had been removed, having initially guided to around £50m.
A £80-110m further in-year cuts are expected in 2017 as the company keeps on track for around £200m annualised run rate by end 2017.
"2016 has been an important year as we accelerated the transformation of Rolls-Royce," East said.
"Despite the significant market and aerospace product transition challenges identified in 2015, we have made operational progress and performed ahead of our expectations for the year as a whole.
"At the same time we have delivered major changes to our management and processes and, while we have made good progress in our cost cutting and efficiency programmes, more needs to be done to ensure we drive sustainable margin improvements within the business."
The massive loss, which was well known by the market in advance, did not affect the dividend, with a full year payout of 11.7p per share, down from 16.4p in 2015
For 2017 the engine maker said it expected "modest" improvement in sales and targeted free cash flow to be "similar to 2016".
The pre-tax loss, which is one of the biggest in corporate history, reflects a £671m corruption fine but more so the collapse of the pound, which led to a £4.4bn non-cash write-down of the company's derivatives contracts.
Revenue for the calendar year of £14.96bn was up 9% on a reported level, though underlying sales falling 2% to £13.78bn due to a weakness in the marine market coming from the oil-price slump.
At the underlying level profits at constant exchange rates were down 49% to £813m, with profits down in all its segments, including a 280% fall in marine and 60% for civil aerospace.
However, this was much better than the consensus £685m profit forecast by City analysts, though in early reactions there were differing opinion around whether the company had truly turned a corner.
On cost-cutting, chief executive Warren East said so far more than £60m of 'incremental in-year' costs had been removed, having initially guided to around £50m.
A £80-110m further in-year cuts are expected in 2017 as the company keeps on track for around £200m annualised run rate by end 2017.
TUI AG
TUI AG’s first quarter loss narrowed as revenue grew as the Anglo-German travel firm said it expected to grow underlying earnings 10% for the full year.
The FTSE 100 company plans to continue making disposals as part of its growth strategy, having sold Hotelbeds Group in September and on Monday TUI announced it would sell Travelopia, its portfolio of specialist travel brands to KKR for around £325m.
The company is also in talks with Etihad for the sale of TUI Fly to create a new airline.
With UK bookings remaining significantly ahead of the previous year, quarterly underlying losses before interest, tax and amortisation (EBITA) narrowed 17% to €66.7m, compared to the previous year.
TUI also swung to an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of €29.8m, from a €7.5m loss, while revenue increased 2.3% to £3.28bn.
Based on the company's performance in the first quarter and current trading, it expects at least 10% growth in underlying EBITA for the full year on constant currency.
The company said: “We have delivered a good operational performance in the first quarter and current trading remains in line with our expectations. We are continuing to deliver our growth strategy, transforming the business as the world's leading integrated tourism business based on own hotel and cruise brands, with further openings and launches planned for the coming year."
Vedanta
Third quarter pre-tax profits at Vendanta Resources' main subsidiary rose to INR3,884 crore from INR1,120 crore in 2016 thanks to a recovery in commodity prices combined with an increase in volumes and cost efficiencies.
Sales at Vedanta Ltd for the period came in 31% higher year-on-year at INR19,320 crore.
Quarter-on-quarter revenue was up 23%, driven by higher volumes from Zinc India, increased volumes at Iron Ore on account of the monsoon season in the second quarter, ramp-up at the Aluminium and Power businesses, and higher metal and oil prices, the company said.
This was partially offset by lower volumes from Oil & Gas due to a planned shutdown during the quarter, and the Skorpion mine at Zinc International, Vedanta said.
Increased third quarter revenues were the result of higher volumes at Iron Ore due to recommencement of operations, ramp-up of volumes at the Aluminium and Power businesses and higher volumes at Copper India and Zinc India.
This was partially offset by lower volumes from Oil & Gas, and Zinc International due to closure of the Lisheen mine, in the third quarter of 2016.
Chief executive Tom Albanese said the company's financial position remained “robust” and it continued to strengthen the balance sheet by maximising free cash flow and reducing debt.