Rolls-Royce (RR.) made an underlying pre-tax profit of over £1.4bn in 2012. A decade ago it was just £255m. True, the acquisition of Tognum and restructuring its relationship with Pratt & Whitney made a big contribution to the 24 per cent increase in profits, but cost cutting and a booming civil aerospace business will drive double-digit growth at the engineer this year, too.
Selling its stake in International Aero Engines (IAE) to Pratt & Whitney made Rolls another £699m last year, boosting the reported figures in our table and adding £942m to its cash pile. Even without IAE, the core civil aerospace division made an extra 27 per cent as it kept pace with a sharp increase in aircraft production. Margins here increased by a fifth and over £10bn of new orders for fuel-efficient Trent engines grew the unit’s order book to £49.6bn, easily justifying management’s confidence in strong profit growth again this year.
Expect an improvement at the marine division, too, given high oil prices are driving demand from offshore oil & gas exploration, especially in Brazil. That will make sure its growing network of services centres is kept busy. It should also offset any downward pressure from a "modest" decline in military profit, substantially due to sequestration in the US which Rolls thinks will kick in as planned on 1 March.
Investec is predicting current year adjusted pre-tax profit of £1.75bn and EPS of 64.5p (2012: 59.3p).
ROLLS-ROYCE (RR.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,017p | MARKET VALUE: | £19bn | |
| TOUCH: | 1,016-1,017p | 12-MONTH HIGH: | 996p | LOW: 758p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | 8 | |
| NET ASSET VALUE | 325p* | NET CASH: | £1.3bn | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p)** |
|---|---|---|---|---|
| 2008 | 9.1 | 0.73 | -73.6 | 14.3 |
| 2009 | 10.4 | -1.89 | 120.4 | 15.0 |
| 2010 | 11.1 | 1.13 | 29.2 | 16.0 |
| 2011 | 11.1 | 1.19 | 46.0 | 17.5 |
| 2012 | 12.2 | 2.07 | 123.2 | 19.5 |
| % change | +9 | +74 | +168 | +11 |
Ex-div: 24 Apr Payment: 1 Jul *Includes intangible assets of £2.9bn, or 155p per share **Paid via an issue of 'C' shares | ||||
