Rolls-Royce, Spectris and Pendragon

“Confirmation of rising UK inflation failed to knock markets off their stride in afternoon trading,” says AJ Bell Investment Director Russ Mould.

“The blue chip index remains up 0.2% on the back of the news, as investors welcomed fresh weakness in the pound which followed the lower-than-expected headline inflation reading, which persuaded many to argue the Bank of England will be slower to raise interest rates than many believe.

“Rolls-Royce has mounted something of a fightback despite reporting losses of £4.6bn in 2016, with its share price now down 3.3% versus an initial fall of 4.4%. It’s worth noting that the company took a £4.4bn hit from the post-Brexit vote sterling slump and paid out £671m to settle bribery charges during the year. Furthermore, while underlying profit is down a hefty 49%, this is ahead of analysts’ expectations, with revenue up 9% to nearly £5bn. Investors may therefore see this as the end of a bad period for the company, although many will be keen to see the cashflow position – down 79% to £100m in 2016 – start to improve following a significant period of investment.

“Meanwhile Spectris, which works with manufacturing companies to improve productivity, was up 3% despite operating profits slipping by 73%. The firm put this down to a £115m charge on its accounts linked to Omega Engineering and ESG Solutions, and investors were clearly swayed by a strong performance in its core precision instruments business, with adjusted operating profit up 22% to £200m.

“Finally Trevor Finn steered automotive retailer Pendragon was off 3.5% as the CEO guided towards ‘marginal growth’ in the new car market in 2017. This overshadows robust full year figures showing a 7.6% hike in profit before tax to £75.4m, with Finn confidently believing the UK’s largest automotive online retailer can generate ‘at least double digit growth’ in used car sales in 2017.”

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