Market report: Rolls-Royce loses puff as City fears sixth warning

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Will a sixth profit warning for Rolls-Royce be the final straw for the aircraft engine-maker’s dividend?

The signs look ominous for Rolls, which posts annual results next Friday, widely expected to contain another warning — its sixth in two years.

Chief executive Warren East admitted after its last profit warning that it could happen again and today, broker Panmure Gordon suggested the shareholder payout could face the chop as airlines stop using older engines.

Analyst Sanjay Jha also urged East, under pressure from largest shareholder ValueAct to turn the profit warning machine around, to bolster the balance sheet by raising £1 billion. “We propose that simultaneously suspending the dividend and raising £1 billion of equity next Friday could provide a floor to the share price,” Jha said.

Rolls-Royce was up 3.5p to 516.5p but underperformed the wider market as the FTSE 100 rebounded 53.66 points to 5890.80 thanks to a mini-rally from commodities.

Most of the big mining names littered the leaderboard, with Anglo American making the biggest improvement, 26.6p, or 9.7%, better off at 300.8p as the price of copper was boosted by a weaker dollar. 

Suggestions by Nomura that ITV might dole out a chunkier dividend failed to filter through to investors as the broadcaster-turned-producer rose just 1.4p to 264.8p. The broker said the market is only expecting a £250 million dividend, but hinted that it could afford to pay double that.

A strong first-quarter update from Compass buoyed shares by 59p to 1233p — a record for the catering group.

Roadside recovery group AA, which launched its insurance underwriting business last week, accelerated 10.9p to 286.5p on its solid full-year update in which the FTSE 250 group said results would be in line with expectations.

Specialist lender Paragon suffered on the mid-cap index, down 1.7p to 308p after broker JPMorgan Cazenove cut its rating to neutral from overweight.

On AIM, business incubator Imperial Innovations climbed 15p to 415p as it raised £100 million in a share placing.

Accesso Technology leapt 47.5p to new highs of 900p when the theme park ticketing specialist said it would comfortably meet full-year expectations even after heavy investment to meet demand from Alton Towers and Thorpe Park operator Merlin Entertainments, which signed up to its services last year.

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February 5, 2016 |
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