Activist investor turns up the heat on Rolls-Royce

COULD the road to recovery be about to get harder for Rolls-Royce to navigate?

The troubled engine maker revealed activist US investor Harris Associates, most notorious for pushing the Saatchi brothers out of their namesake ad agency, has taken a 5pc stake.

Problems with its Trent 1000 engines have been a headache for Rolls since 2016, when it was discovered that turbine blades were wearing out more quickly than expected. It has earmarked £1.6bn so far to deal with the fallout, alongside a sweeping turnaround orchestrated by chief executive Warren East.

Harris looks for companies which are trading at a lower price than it believes they are worth, saying it only invests in firms that ‘offer significant profit potential’ and ‘are run by managers who think and act as owners’.

Although many an eyebrow in the City will be raised by Harris’s latest investment, Rolls-Royce investors were far from panicked, with shares closing up 0.3pc, or 1.8p, at 726.6p.

Investment manager M&G barrelled to the top of the Footsie as brokers released their first verdicts on the stock.

Deutsche Bank began its coverage with a ‘buy’ rating and a target price of 300p.

In a backhanded compliment it insisted that M&G is ‘too cheap to ignore’, despite looking ‘unexciting’ with ‘not much growth and too much debt’. JP Morgan concluded it is worth 271p a pop and deserves an ‘overweight’ rating, while Barclays also initiated an ‘ overweight’ rating, although with a 256p price target.

The glass-half-full prognoses sent M&G 5.6pc higher, up 11.35p, to 214p, in its first strong day of trading since it split from Prudential (up 2.4pc, or 33.5p, to 1437p) on Monday. M&G’s rise bumped the wider

FTSE 100 into positive territory, rising 0.67pc, or 48.25 points, to 7260.74. But it was held back from stronger gains as more Brexit uncertainty hit housebuilders, which are especially exposed to the health of the UK economy.

Berkeley Group lost 2.3pc, or 104p, to 4437p, Barratt Developments fell 2.4pc, or 16.2p, to 652.6p, and Persimmon inched 1.7pc lower, down 40p, to 2355p.

The mid- cap FTSE 250 index closed almost flat, down 0.01pc, or 0.97 points, at 20,180.94.

There was a bonanza of updates for London’s listed mining firms. Precious metals miner Fresnillo sunk 1.7pc, or 10.8p, to 639.2p after silver and gold production fell in the three months to September 30, and it warned full-year output would be at the lower end of its guided range.

Investors were more sympathetic to a production warning from Antofagasta, the world’s biggest copper producer, which guided that the political upheaval in Chile would lower its output by around 5,000 tons. It rose 0.9pc, or 7.6p, to 865.2p.

Rio Tinto also edged higher, rising 0.7pc, or 30p, to 4058p, after it said it would review the future of its aluminium operations in New Zealand. Closer to home, Sirius ended 0.2pc higher, up 0.01p, at 3.13p, after its first day of trading as a small-cap firm.

It was booted out of the FTSE 250 index in a reshuffle to make room in the FTSE 350 for M&G.

The Government must respond to a Parliamentary petition with more than 11,000 signatures demanding the Treasury supports Sirius by offering a full loan guarantee for the troubled company, which last month failed to secure the cash needed to finish building its £4bn potash mine under the North York Moors National Park.

Sirius blames the Government for derailing a financing package by not underwriting a loan.