2013年7月26日 星期五

Daily Mail, London, City Focus column

Source: Daily Mail, LondonJuly 26--IS the mighty Rolls-Royce engine starting to splutter? It might seem an odd question to pose when the group's half-year results yesterday propelled it straight to the top of the FTSE 100 share risers' board ? not to mention a little churlish considering the company's long-term performance numbers.儲存倉They show that, over the past decade, it has delivered impressive growth regardless of crises including SARS, the second Gulf War and the financial meltdown (see chart).Rolls-Royce is undeniably a well- managed company with a fine track record.Nonetheless, there are some stirrings of unease ? and this is potentially of wider concern, given its importance as the country's leading manufacturing company at a time when we are trying to rebalance the economy towards industry and exports.On the face of it, Rolls' half-year numbers looked good, with a 15pc increase in the order book to pounds sterling 69.2bn, a 34pc rise in underlying profit before tax to pounds sterling 840m and a 13pc increase in the interim dividend to 8.6p.The shares, which have risen by more than 40pc in the past 12 months, duly gained another 60p to 1240p.But there are a number of clouds for chief executive John Rishton, not least that by his own account, costs and cash outflows need to be curbed, though he has given no detail on how this will be achieved.There was a cash outflow of pounds sterling 461m and a pounds sterling 261m increase in inventory over the period, which Rishton described as "disappointing," and which suggests there is room for improvement in the supply chain."It is clear we have a lot more to do on cost [and cash]," Rishton said. "Fortunately we have significant opportunities to improve both, but this will take time and firm resolve to deliver."Profits before financing actually dropped 30pc to pounds sterling 881m, largely because last year's number included Rolls' profit on selling its stake in the IEA迷你倉沙田engine-making operation to joint venture partner Pratt & Whitney.And taking account of financing costs ? which ballooned to nearly pounds sterling 1.6bn from pounds sterling 254m in the same period of 2012 after its $26.7bn hedging book was hit by movements in the dollar ? Rolls slipped pounds sterling 491m into the red before tax.The exercise of valuing derivatives that are used to hedge against currency movements against market prices, will involve large swings. Still, these are big numbers on any estimation.Another cloud is the investigation into alleged bribery in China, Indonesia and other markets.Allegations of wrongdoing were brought to Rolls' attention by the Serious Fraud Office last year, and Rishton has appointed senior City lawyer Lord Gold to conduct an independent review of its anti-corruption controls.Rishton has made clear he will show zero tolerance for unethical behaviour, but the episode is an embarrassment for a company with such a long-unblemished reputation.At this point there is no question that the City is ready to give Rolls the benefit of the doubt. Howard Wheeldon, a veteran industry analyst, points out that the results are 'in most respects excellent' and that while cost and cashflow concerns are justified, Rishton and his team fully recognise they need to be tackled.It would certainly be foolish to bet against the company, given its long-term record. In the past 15 years, its revenues have grown 265pc and the share price is up by more than 560pc.While there is little it can do about the dollar exchange rate, maintaining efficient operations and controlling costs is a constant challenge for a manufacturer like Rolls, but one that history suggests the company is perfectly able to meet.For the sake of UK plc, we have to hope so.Copyright: ___ (c)2013 Daily Mail (London, ) Visit the Daily Mail (London, ) at www.dailymail.co.uk/home/index.html Distributed by MCT Information Services迷你倉價錢

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