Companies roundup: Rolls-Royce dividend & Schroders’ struggles

Rolls-Royce (RR.) shareholders were buoyed by the news the company would reinstate its dividend when it publishes its full year report. It hasn’t paid a dividend since 2020 but payouts will make a return as chief executive Tufan Erginbilgiç’s turnaround plan gathers pace.

Rolls reported a doubling of its operating profit in the first half to £1.6bn, with improvements attributed to its transformation plan and the £545mn reversal of an impairment previously taken against its civil aerospace program.

Revenue increased by 19 per cent. All three main divisions recorded improvements but were led by the civil aerospace business, which reported increases both in new engine deliveries and aftermarket revenues. Full-year guidance for operating profit and free cash flow were both lifted from at least £1.7bn to at least £2.1bn and the company’s shares jumped by 10 per cent. MF

Read more: Can Rolls-Royce’s shares maintain their thrust?

Schroders underperforms as acquisitions fail to deliver

The market was not sold on interim results for gold-plated asset manager Schroders (SDR). Obvious evidence of weak flows and associated fees canceled out any positive news related to the company’s new joint venture into private markets with insurance company Phoenix (PHNX). Shares fell 6 per cent in early trading.

Total group AUM was £774bn. Wealth management put in the best result with net inflows of £3.7bn. In asset management, the loss of at least one large client mandate in its solutions business partly explained the outflows here of £7.6bn. The resulting fall in fees meant that operating profits of £315mn were significantly behind the market consensus of £341mn for the half.

Analysts were generally disappointed with the performance. Rae Maile at Panmure Liberum said: “Recent acquisitions have not delivered; costs are too high. The next CEO will have a task on their hands but, after many years of share price underperformance, they will also have the chance to present a more sober assessment of positioning, progress and opportunity.” J.H

BAE Systems gains more ground

BAE Systems (BA.) reported a healthy set of first-half numbers, which were in line with analysts’ expectations. Revenue grew by 13 per cent and underlying operating profit by 11 per cent.

Although not quite as strong as last year, an order intake of £15bn increased the size of its backlog by over £4bn to £74.1bn.

Full-year guidance for sales, underlying earnings and free cash flow were all upgraded, with the latter now expected to be at least £1.5bn, but the shares were flat in early trading. They have gained 17 per cent since the start of the year, and by almost 40 per cent over the past 12 months. MF

Read more: The growing defensive stock you haven’t heard of

London Stock Exchange rises on higher subscription revenue

London Stock Exchange Group (LSEG) enjoyed a decent half as the business, which is primarily a financial data and analytics provider, saw subscription increase of 6.4 per cent with signs that this had accelerated through the half. The market welcomed the results by bidding up the shares by 3 per cent in early trading.

The resulting 5 per cent rise in revenue flowed directly through to the bottom line and LSEG said operating profits had risen to £1.56bn, compared with £1.43bn in 2023; this was just ahead of the market’s consensus expectations of £1.53bn. The high operational gearing of the business model was clear in the 29 per cent rise in free cash flow to £761mn.

Chief executive David Schwimmer confirmed his keenly anticipated partnership with Microsoft was on track: “Our partnership with Microsoft is approaching commercialization as the first product becomes more widely available by year-end.” J.H

Dowlais allows hydrogen to escape

Automotive engineering group Dowlais (DWL) has sold off its hydrogen business, which made units for storing hydrogen and electricity. The company had only just begun to make meaningful revenue, generating £5mn last year, although it declared a £15mn operating loss on this.

The business has been bought by family-owned company Langley Holdings. Terms were not disclosed but RBC Capital analyst Mark Fielding concerned that the disposal should be positive for the company’s bottom line and simplifies the business. MF