Rolls-Royce drags down FTSE as China data knocks miners

Rolls-Royce reported an operating loss of £1.2 billion in its annual results, though after including one-off charges of £976 million against the Trent 900 and 1000 plane engine programmes, underlying profits rose 71% to £633 million.

George Salmon, equity analyst at Hargreaves Lansdown, said: ‘Many parts of the business are operating more efficiently than they have in the last few years, but Warren East hasn’t quite got Rolls-Royce firing on all cylinders.

‘While Rolls deserves credit for freeing up cash by changing its supplier terms, much of the improvement is being driven by extra upfront payments and £70 million of restructuring costs have been excluded.’

Miners also lagged in the large-cap index as data from China showed factory activity had fallen to a three-year low in February. Antofagasta (ANTO) shares dipped 2.5% to 940.2p, Rio Tinto (RIO) fell 2.2% to £43.28 and BHP Group (BHP) dropped 2.4% to £17.59.

An abrupt end to the summit between US president Donald Trump and North Korean leader Kim Jong-un also hit investor sentiment, as the two failed to strike a deal on sanctions.

British American Tobacco (BATS) was another major faller in the FTSE 100, with shares in the cigarette producer down 3.2% at £27.06 as investors remained cautious about its ability to deal with changing regulation, despite full-year results in line with market expectations.

Revenues from its ‘New Generation’ products grew by 95% to £900 million, with the group expecting this to grow five-fold over the next five years.

However, the US Food and Drug Administration is proposing to ban menthol cigarettes, threatening BAT’s market-leading Newport brand. The US regulator is also proposing to regulate nicotine content down to non-addictive levels.

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The business faces a Canadian appeal court judgement on a smokers’ class action damages suit, which could result in a £6 billion compensation bill. BAT’s debt is already high following the £42 billion acquisition of rival Reynolds America in 2017.

The FTSE 250 was also down 106 points, or 0.5%, to 19,048, as shares in Aston Martin (AML) dived 17.7% to £11.31 after the luxuty car maker reported a fall in full-year profits.

Chief executive Andy Palmer warned a delay to Brexit would be a ‘further annoyance’, saying it had set aside £30 million for any disruption.

The annual results also revealed it spent £136 million to list in London in October, tipping the company into a £70 million loss in 2018, having lost a third of its market value since its initial public offering.

‘So why does chief executive Andy Palmer describe last year as an “exceptional” one for the group?,’ quizzed AJ Bell investment director Russ Mould. ‘Well it did post record revenue of more than £1 billion with volumes ahead of guidance, but today’s negative market reaction suggests it has a lot more to do to win over the sceptics.’

Howden Joinery (HWDN) was also ramping up Brexit preparations, stating it had stockpiled inventory worth £15 million in case of any supply interruptions.

Shares in the kitchen seller tumbled 7% to 489.6p on a fall in margins, with a £15 million expected increase in operating costs, along with a £3.8 million pension equalisation charge.

The pound dipped marginally to $1.331 against the dollar.  



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