Member Info for Grayling

Thanks Simon, good suggestion. Ya 2 houses, Ya Audi, Ya filtered BYE.

:-)

A nice finish to the week with RR holding on to the recent gains. Lets hope the recovery continues and a measure of stability has now been restored. Certainly seeing director buys amounting to well over £250K since the Webex has to be a positive. A good weekend to all :-)

The RR pension liabilities have been somewhat mitigated (as clearly stated in that article) by 2 actions on the part of the company. Firstly, they closed the final salary (FS) pension scheme to new entrants in 2007 and secondly in 2011 they insured the outstanding liability for existing FS members who might live longer than expected in a deal with Deutche Bank (a so so-called longevity swap). As the scheme itself is relatively well funded any deficit arising subsequent to these arrangements could be paid for by the fund itself rather than the RR and if this became a burden they could do what almost every other FS pension scheme has done (even the Civil Service) and close the FS scheme to EXISTING members switching them to a defined benefit or contribution plan. Overall, I do not see this impacting on the bottom line at RR.

Thanks very interesting and the pension problem is a new one on me. No mention of it elsewhere as a fiscal drag.

Lewis Booth bought 20,000 yesterday at 613p a share. Again not a token sum and must bode well for the company. Since the Webex we have now had 2 x 20K and 1 x 7.8K director buys.

Simon1013 and Sharknet. Thanks for the comments from you both, they are much appreciated as I try to get my head around the way in which RR generates and books profits on engine sales and exactly what these boards are for. As I am a company outsider, can you expand on "unlinked". I presume you mean a looser arrangement between RR and the purchaser/operator as to how engines are maintained over their life? Or are you referring to the way that income/profits are accounted for? East mentioned the "risk' factor as a major driver for airlines and other customers to use the totalcare package. If they go for a more ad hoc servicing arrangement how does the risk balance shift between RR. and the buyer and will this greatly reduce engine aftercare income?

As for bad news coming down the line, I think RR just need to clarify how the money flowing in from engine units sold combined with the aftercare packages convert into or are booked as profit. It seemed to me from the Q & A that either Rolls don't know themselves or that the landscape is changing so quickly that they cannot make reliable estimates and predictions. I can see how this can be a very complex audit and that the internal accountancy systems are probably very complex and may be fragmented. Lets hope that we are not in a "Tesco" situation where profits (either past present or future) have been misrepresented due to "over creative" accounting.

Well on the positive side directors have been buying yesterday and today 20.000 and 7,700 at £6.03. On the negative side, Societe General have just rated RR with a target price of 450p. However, at least they are consistent as this is simply a reiteration.

A god day and what must count as a positive reaction to yesterday's statement and Q & A. All helped along no doubt by the hawkish worldwide military situation. I think there are still potential problems to be uncovered and we may still get more bad news from management in the coming year. I am cautiously optimistic, but these certainly don't go into the drawer marked buy and forget along with my NG. and PHNX holdings.

I do not know the details of GE/PW aftermarket costs relative to RR, but I got the impression that the questioner did and the implication was that they may not be as onerous.

It was pure luck. See HSD contract note below: I have removed by personal and monetary details Bargain Reference: Account Code: Account Holder(s): Order Type: At Best Order Value: Deal Date: 12 November 2015 Deal Time: 12:20 Settlement Date: 16 November 2015 Following your instruction, we have bought on your behalf Stock Name: ROLLS ROYCE HOLDINGS ORD GBP0.20 Quantity: Price: 5.1245 GBP

I agree the city reaction seems positive (although less so in the press/BBC). Through gritted teeth I doubled up my holding at 512p and brought my average down to the low 600s. I have averaged down before (RSA, RBS both now sold) and this is the first time it has been to my benefit (so far). lets see how the dust settles between now and the dividend announcement in February as that will be the next decision point for me.

J P Cazenove first to get in post Webex. Reiteration "underweight" target price 630p. Fine by me.

I watched the webex yesterday and the Q & A session afterwards, which went on well beyond market close. The latter was far more informative as to where the problems lie. My take on the presentation was as follows: 1. East has no intention of selling off any part of the business such as the marine and or nuclear divisions as he sees these as opportunities for future expansion once short term problems are resolved and markets improve. I would tend to agree, but this may put him in conflict with valueAct who clearly want to see a break up and concentration on the aviation side of the business. 2. Rolls Royce have a very byzantine and complex internal accounting system relating to the upfront profits on engine sales and the subsequent aftercare market. This seems to make any statements about the bottom line either very difficult to interpret or communicate to the markets. This seems to be due to the variable and (often confidential) terms on which their total aftercare packages for engines sold generates income over the life of the airframe. So despite a full order book and reassurances from RR today that this will generate a steady flow of powerplants into new (wide bodied) planes going forward, they were less able to give any indication as to what this will mean in terms of profit. When the going was good, operators were very keen to take RR total care, mainly because it shifted the risk from operator to RR. In other words if a plane falls out of the sky and it is down to any problem with the engines then it is RR that is to blame and not the operator. However, as civil aviation has become a more challenging market operators are looking again at these RR total care packages. The FD was asked whether if given the choice an operator would rather lay up a plane with RR engines or GE/PW engines given the fixed servicing costs agreement. He could not answer this and to be honest he waffled. East also intimated that several operators were looking again at the aftercare packages and that RR was in discussions with several of these as to how to move forward in a way that benefits them, but how this will impact on RR profit was unclear. So it seems that one of East's biggest tasks is to actually get a grip on the real value of the engines that RR builds and sells in terms of upfront profit (relatively low) as opposed to the potentially lucrative aftercare packages the company offers to its customers. It is this latter part of the RR business model that is under the most scrutiny and until this is sorted RR will not be able to give forward guidance on future profitability in this division.

Unfortunately life is not fair and many companies faced with difficult times will cut costs drastically (including staff) just so that they can maintain the dividend (look at Shell for example). You may be right and it could go or be cut. This will be bad for long term holders, many of whom are employees or ex employees and are relying on dividend growth to boost their holding/income. Problem is a lot of folk have now bought in at what they hope is the bottom. They are less bothered about yield and just want a quick (1-2 year) profit as the share recovers.

This is holding even edging up slightly. My view is that if the dividend was being cut it would have been in the RNS. If they suddenly announce a cut in the presentation this afternoon I would be very surprised and disappointed. Also if news like that is imminent "somebody" always knows and the price reacts in advance accordingly. Lets hope that East is convincing enough to keep things at least steady and that all the bad news is already in the price.

No mention of the dividend in the press release. If they were going to cut this I would have thought the news would be in the RNS, but it could always come this afternoon.

Busateetee. Don't know about that. How devious was he when he ran ARM? He may not be an engineer but in ARM he has had to run a successful company in a rapidly changing market before, so it gives some hope that he can turn things round. The previous regime clearly got into an all fired mess and let things slide rather than confronting the problems head on.

British engineering company Rolls-Royce, under pressure after a series of profit warnings, said it would increase its stakes in two aero-engine maintenance centres as part of a plan to improve competitiveness. Rolls-Royce said on Monday it would invest a total of $206.5 million to bring to 50 percent its ownership of maintenance centres (AMC) headquartered in Singapore and Hong Kong, and bring in new agreements to make its three AMCs vie for new work. New chief executive Warren East, four months into the job, has said the company must cut costs and be overhauled to better adapt to changing markets. Rolls-Royce said the new agreement with its AMCs would improve customer service and the shareholding changes would help simplify its business.