ROLLS APPROACHES FLOAT WITH PROFITS SET TO RISE

  State-owned engine maker &lt;Rolls Royce
  Plc> launches its prospectus for privatisation tomorrow with
  many analysts forecasting higher profits this year. But it is
  likely to miss contracts to power the proposed &lt;Airbus
  Industrie> A340 aircraft.
      The company's so-called "pathfinder prospectus" gives all the
  details of its stock market flotation except for the price at
  which shares will be offered.
      Last month, the company announced that pretax profits rose
  in 1986 to 120 mln stg from 81 mln the year before.
      Brokers Barclays de Zoete Wedd, BZW, sees 155 mln profit
  for 1987.
      Analyst Tim Harris of Phillips and Drew said rising profits
  and a low tax charge would be offset by the fact that Rolls
  operated in a sector which traditionally attracted low ratings.
      Assuming the company was valued at around eight times
  earnings, this would give a selling price valuing it at about
  1.2 billion, though he said the recent good performance of the
  aerospace sector could nudge this figure upwards.
      BZW is currently forecasting a higher sale price at between
  1.5 billion and 1.7 billion.
      The price will be increased by it being likely to have much
  of its debt wiped off by a government anxious to assure the
  company's health when it has to fend for itself. Rolls was
  rescued from bankruptcy and taken into state ownership in 1971.
      When the government announced the sale, it said it would
  inject permanent capital equivalent to net debt -- around 250
  mln stg at end-1986 -- into the company.
      Analysts noted this was necessary to ensure Rolls a credit
  rating to match those of its main competitors such as General
  Electric Co &lt;GE.N> and United Technologies Corp's &lt;UTX.N> Pratt
  and Whitney unit.
  

