Shares in Rolls-Royce (RR.) bucked the trend, as they were marked up on release of encouraging full-year figures. Valuations for the FTSE 100 constituents have been decimated as panic grows over the coronavirus onslaught. But the aerospace giant cheered shareholders with confirmation that it is well on the way to remedying technical issues with its Trent 1000 engines.
Rolls-Royce has been dogged by blade deterioration issues on its Trent programme, which led to multiple aircraft being grounded in the second half of 2019. The group recorded £578m of Trent in-service cash costs for the year, and expects an aggregate figure of £2.4bn for the period between 2017 and 2023. But blissfully for investors, who have endured multiple profit warnings, Rolls-Royce’s £1.4bn exceptional charge linked to the programme remains in line with the guidance it provided in November. It expects to take the number of aircraft grounded by its engines down to single digits by the end of the second quarter.
There was more good news as Rolls delivered a record 510 wide-body engines and secured an unprecedented defence order intake of £5.3bn, while its restructuring efforts continued, with 2,900 job losses, yielding savings of £269m – it is targeting £400m by the end of 2020. Rolls’ free cash flow (FCF) rose to £911m and the group expects this to pass the £1bn mark this year, which will be supported by core operating profit growth of 15 per cent excluding any material coronavirus impact. The group acknowledged the risk posed to air traffic growth by the outbreak, but remains confident of reaching its £1.9bn mid-term FCF target.
Bloomberg consensus estimates give adjusted forecasts per share of 27.5p for 2020, rising to 40.7p in 2021.
| ROLLS-ROYCE (RR.) | ||||
| ORD PRICE: | 630p | MARKET VALUE: | £ 12.17bn | |
| TOUCH: | 630-630.4p | 12-MONTH HIGH: | 990p | LOW: 586p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | NA | |
| NET ASSET VALUE: | * | NET DEBT: | £1.24m** | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend † per share (p) |
| 2015 | 13.70 | 0.16 | 4.5 | 16.4 |
| 2016 | 14.96 | -4.64 | -220 | 11.7 |
| 2017 | 14.75 | 3.90 | 184 | 11.7 |
| 2018 | 15.73 | -2.95 | -129 | 11.7 |
| 2019 | 16.59 | -0.89 | -69.1 | 11.7 |
| % change | +5 | - | - | - |
| Ex-div: | 23 Apr | |||
| Payment: | 01 Jul | |||
| *Negative shareholder funds (intangible assets of £5.44bn, or 282p a share) **Includes lease liabilities of £2.35bn) †Distributions made via an issue of 'C' shares. | ||||
