Panmure Gordon downgrades Rolls-Royce to 'sell' after restructuring plans

5th Nov 2014 10:41

Panmure Gordon has downgraded Rolls-Royce from 'hold' to 'sell' after the engine maker announced plans on Tuesday to accelerate its cost-cutting programme with 2,600 job cuts over the next 18 months."For us, this was just another profit warning, issued only a few days after the previous warning," said Panmure analyst Sanjay Jha, referring to Rolls' recent reduction in underlying revenue guidance for 2014 and 2015."More importantly, it suggests that far from being 'well positioned in growth markets' the management is now dealing with a group in decline, despite record order books, and is struggling to stay on top of events," he said.Rolls said the actions are expected to result in incremental costs of £120m of two years.Jha pointed out that the plans have reduced underlying profit guidance for this year by £60m, compared with previous expectations of a 'flat' outcome from last year. However, he has cut his profit before tax forecasts for 2014 by a greater £80m or 5% to £1,636bn after including higher interest charges."Cash will be scarce next year and we are confident that the share buyback will be cancelled," Jha said.Rolls also announced that its chief financial officer (CFO) Mark Morris would be leaving the company after 27 years, having served as CFO since January 2012.Rolls' shares were flat at 848p by 11:23 on Wednesday.