Market Report: Rolls-Royce hit turbulence

Goldman Sachs removed the embattled FTSE 100 engineer from its list of European stocks to buy and instead gave it a neutral rating

Rolls will pay 7.1p a share for 2015, compared with 14.1p last year (EPA/MAURITZ ANTIN)

Rolls-Royce hit turbulence yesterday as Goldman Sachs called the top of the aircraft engine maker’s market ascent.

The broker removed the embattled FTSE 100 engineer from its list of European stocks to buy and instead gave it a neutral rating. “Following recent outperformance, we believe the current multiples for Rolls-Royce adequately reflect the group’s medium-term growth prospects,” Goldman said after a 37 per cent surge from the shares in a month. That followed heavy falls as Rolls-Royce racked up five profit warnings in less than two years.

The downgrade came as the company, which last week gave US activist investor ValueAct a seat on the board, shed another 150 management jobs. Rolls dived 18p to 682p.

European Central Bank president Mario Draghi sent stocks yo-yoing yesterday. After initially giving them a boost by saying the ECB is topping up its monthly bond-buying programme, he then said he did not anticipate further interest rate cuts, causing the FTSE 100 to end down 109.62 points at 6,036.70.

Whitbread, up 7p at 3,708p, avoided the sell-off as investors warmed to the Costa Coffee owner. They listened to advice from Jefferies, which claimed the recent share slump does not now factor in a potential spin-off of the café chain and raised its rating to hold.

Car insurer Esure also dodged the carnage, unchanged at 263p as it emerged that Toscafund has increased its stake in the Sheilas’ Wheels owner to above 5 per cent. Earlier in the week, Esure revealed that underlying pre-tax profits slumped 23 per cent last year to £83m.

Ukraine-focused iron ore firm Ferrexpo, a former FTSE 100 constituent, was left 5.5p lighter at 33p after its annual results. Profits and revenues both took a hit, as expected, but a rise in net debt to $868m (£607m) was the big concern for shareholders.

Alarm bells rang when Sprue Aegis, the AIM-listed smoke alarms maker, said it now expects a lower annual operating profit of £8.3m, after agreeing to pay its supplier DTL more to help it deal with higher labour costs in China. Sprue fell by 28p or 10 per cent to 264.5p.