Akis1999
17 Feb 2017
Re: HL view " It's an absolute credit to them that we have seen very few lemons attached to wings in a highly sensitive safety business"Well the exploding Airbus A380 engine is not forgotten. And to compound the issue the wings of same A380 also failed (in 2012) - made in Wales.And we have this in 2016 no less:"ANA, the largest operator of Boeing’s 787 Dreamliner, said it was cancelling services to replace compressor blades in the aircraft’s Trent 1000 engines produced by FTSE 100 listed Rolls-Royce.Shares in the Derby-based engineer fell almost 2pc on the news that the Japanese carrier had found corrosion on blades inside the engines."********** ********** *Down a lot today (3.97%) but the P/E is still too great in my opinion.I have no position in RR.
Fabius1
16 Feb 2017
Re: HL view nk'Rolls Royce: not as bad as it could be, says Hargreaves Lansdown 'Could also be a bit better.It's a shame. Another genuine quality GB outfit beset with a number of serious management issues. A few years ago I watched a doc on the BeebCeeb about RR featuring the development of the Trent aeroengine. I was impressed and appalled. Impressed by the technical skills, commitment and enthusiasm of the employees and appalled by the logistical nightmare of what, in many cases, felt a bit like a cottage industry of subbed bits and pieces that go to make up RR. It just felt a little bit Heath Robinson despite the high level of skill involved. It's an absolute credit to them that we have seen very few lemons attached to wings in a highly sensitive safety business. I really hope they get themselves sorted out and thoroughly rationalise the company. Afraid to say that might just mean employing a few more robots. Worse case scenario would be the appearance of goodwill hunters and suits with calculators.F1
Fabius1
16 Feb 2017
Re: Share price Numberbiter'If we are to have Brexit, then the hope is that we return to a prudent accounting system, namely UKGAAP (generally accepted accounting practice).'Not before time along with a list of items well overdue after years in LaLa land.Think there are a few more to crawl out of the FTSE woodwork.F1
Akis1999
15 Feb 2017
Re: Share price Broncomaniac Many thanks for the elaborate explanation. So if RR sell engines to an airline, say Singapore Airlines, the invoice is issued in SGD, delivery time and invoice payable could be years ahead, but at the same time RR buys FX derivatives to protect itself against a future drop in the SGD. Is this what you mean? And what derivatives are these that can look years ahead? I had thought max is around 9-12 months.Anyway, no matter what the details, the practice of this hedging has cost RR a ton of money and in the absence of any solid facts, other than "financing costs", it is not a simple "mark to market - who cares" but rather a rolling contract with very real consequences.I can sort of see the fall in the pound negating those contracts which are taken to protect against a strengthening of the pound. However these "negatives" have been on the books for many years, and the pound was not falling that badly in earlier years.Since there is no clarity on the issue I wonder if we should dismiss everything and concentrate on other account metrics, I am not sure what, maybe cash in bank of the last 3-4 years. Not sure.Having financial products on the balance sheet that can cause around £7bn worth of losses in the past 3 years does not compare favourably with fractional profits and decreasing dividends. This is not an accounting rules anomaly, it is a real loss, in my opinion, and RR should avoid betting on the FX markets. And I should avoid going anywhere near them. No profits, no dividend, no thank you.
pearlsasinger
15 Feb 2017
Re: Small Modular Reactors Eventually everybody will have one.Argos will stock them.Home security brought to a new level!
nk1999
15 Feb 2017
HL view From Citywire:"Rolls Royce: not as bad as it could be, says Hargreaves Lansdown Rolls-Royce (RR) reported a record loss of £4.6 billion for 2016 but Hargreaves Lansdown said the worst fears for the aircraft engine maker had not been realised.A record fine of £671 million for historic bribery and corruption pushed the aerospace engineer to a loss and group underlying revenue dropped 2% to £13.8 billion, with falling profits in every division.Group profits were 49% down on last year at £813 million, although still above estimates. The shares slide 4.7% to close 34.5p down at 705.5p on Tuesday.‘After already declaring the £671 million in fines relating to historic bribery and corruption, and sterling’s weakness dragging the value of Rolls-Royce’s currency hedge down, it’s unsurprising to see the group declare a record loss this year,’ said Hargreaves Lansdown analyst George Salmon.‘The real focus was on how the group would perform on an underlying basis, and while profits are down by a half, things are not as bad as they could have been. Rolls-Royce is making good progress on cost cutting, and free cash flow has come in better than many had expected.’ He added that currency movements had led the company to a historic loss but ‘going forward, its UK cost base and overseas revenues means the weak pound will be a tailwind… likewise the trend for increasing global long-haul travel’. "
cashpharma
15 Feb 2017
Re: Share price Yes just wait and see the chaos when IFRS makes companies put operating leases onto their balance sheets despite them not being the legal owner and there being no debt agreement just a contract to rent something.
LK Hyman
15 Feb 2017
Re: Small Modular Reactors Card,Yes, it looks like something that the government should encourage, especially in the light of the latest Toshiba and Hitachi clusterfucks, not to mention the fact that the Frenchies are still thrashing around like ferrets in a sack trying to get Flamanville and Finland working.Personally, as a Shell shareholder, I'd still opt first for CCGT powergen on a massive scale, accompanied by CCS but wtfdik.LKH on the flybridge how hard can it be?
LK Hyman
15 Feb 2017
Re: Order book Bronco,"military orders are treated with more priority and the order book gets turned over more quickly."That makes sense, though the speed with which the Royal Navy is getting its F35s doesn't suggest a helluva lorra priority! (Dunno whether they have RR motors).The gap between the turnover ratio (18x civil to 3x military) still seems extraordinarily large.LKH on the flybridge
Peermade
15 Feb 2017
Re: Share price IFRS is a dogs breakfast of stupidity. I remember over a decade ago questioning the "marvelous" Tweedy about IRFS in Geneva and being told that increased transparency would reduce the cost of capital for companies. Increased volatility in the earnings figure only creates difficulty for the company and now many companies provide "normalised income" figures for us to try and review, but what is normalised? I just look at the cash flow statement which avoids the worst IFRS obscenities.
Card Player
15 Feb 2017
Re: Small Modular Reactors P.S. I do not ignore Mrs Margaret Thatcher who, for reasons which have always been beyond me, destroyed the British shipping industry!
Card Player
15 Feb 2017
Small Modular Reactors If Theresa May cannot take the strong 'hint' offered by RR, she will follow into history with Tony Blair, Gordon Brown and David Cameron as Prime Ministers who have helped destroy the British Economy!See: [link]
numberbiter
14 Feb 2017
Re: Share price Good summary Bronco. The problem is the IFRS accounting system which insists on the calculation of 'fair value'. Such fair value calculations result in UNREALISED profits and losses being taken in the Income Statement. Where unrealised losses are taken, it creates the impression that companies are in deep trouble (as Rolls Royce find themselves now). On the other hand, taking unrealised profits is imprudent.If we are to have Brexit, then the hope is that we return to a prudent accounting system, namely UKGAAP (generally accepted accounting practice).
Broncomaniac
14 Feb 2017
Re: Share price Akis, the bulk of the financing cost is the mark to market charge in financial derivatives.Hopefully I can explain this for you.... RR has a huge order book, stretching many years into the future, much of this order book will consist of foreign currency income. Any foreign currency income is exposed to exchange rate movements, so to mitigate this RR takes out foreign currency derivatives.The derivatives act as a hedge by moving in the opposite direction to the value of the order book based on foreign exhange movements. During 2016 the pound weakened significantly, so the value of the order book increased, but at the same time the value of the derivatives decreased.The accounting treatment of the two sides are different however. The derivatives are 'marked to market', which means shown at current market value. The benefit to the order book will only been seen when the orders are actually turned over, which could be several years in the future. During this time the whole situation could have reversed!If you look at the financial liabilities note you will see that some £5bn of liabilities are 'non-current', which means the liabilities caused by this mark to market are not due to convert to cash until 2018 at the earliest.To summarise, RR have not been speculating on financial products, they have been hedging the fx exposure of their order book. The volatility of 2016 has caused a large accounting hit now, but assuming the hedging is effective, the negative cash flows of settling these hedges in future will be offset by increased future revenue from weaker sterling.
Broncomaniac
14 Feb 2017
Re: Order book LKH, haven't looked at the numbers myself, but if you are just quoting the ratio of turnover to order book, all that shows is that civil companies place orders longer in advance, or looking at it another way, military orders are treated with more priority and the order book gets turned over more quickly.
