Rolls-Royce (RR)

Business description

Rolls-Royce is a global power systems company producing gas turbines, reciprocating engines and nuclear plant for civil aircraft, defence, marine and energy. Revenues split broadly equally between original equipment (53%) and aftermarket services (47%).

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Investment summary

Rolls-Royce's November IMS highlighted c £300m of restructuring charges for 2014-15e as the company focuses on those elements of its costs that are within its control; the payback period should be around 2.5 years. 2015 earnings (pre-charges) are now likely to be down by up to 5% (vs previous guidance of flat), with Civil Aerospace margins only really expected to inflect upwards from 2018 onwards. We see the appointment of a new CFO as an opportunity to enhance the relationship with stakeholders, and revisit an approach to accounting that has often appeared opaque or confusing. The subsequent completion of the energy gas turbine business sale to Siemens on 1 December triggered the start of the £1bn share buyback, which commenced on 10 December.

Last updated on 03/08/2015

Y/E Dec Revenue (£bn) EBITDA (£bn) PBT (£bn) EPS (fd) (p) P/E (x) P/CF (x)
2012A 12.2 1.2 1.4 57.8 14.6 10.7
2013A 15.5 1.5 1.8 65.1 12.9 7.0
2014E N/A N/A N/A N/A N/A N/A
2015E N/A N/A N/A N/A N/A N/A

Last updated on 07/07/2015

Latest research

Daily comment

Institutional Comment | Aerospace & Defence | 13/02/2015

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Institutional Comment | Aerospace & Defence | 09/02/2015

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Institutional Comment | Aerospace & Defence | 05/11/2014

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Institutional Comment | Aerospace & Defence | 24/10/2014

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Institutional Comment | Aerospace & Defence | 21/10/2014

A disappointing 2015e, and cautious new medium-term guidance

Institutional Update | Aerospace & Defence | 20/10/2014

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Institutional Comment | Aerospace & Defence | 30/09/2014

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Institutional Comment | Aerospace & Defence | 17/07/2014

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Institutional Comment | Aerospace & Defence | 16/07/2014

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Institutional Comment | Aerospace & Defence | 15/07/2014

Moving to 'risk off'

Update | Aerospace & Defence | 15/07/2014

Daily comment

Institutional Comment | Aerospace & Defence | 19/06/2014

Latest video

Executive Interview - Rolls-Royce

Industry outlook

Rolls' June 2014 Investor Briefing included a clear statement that the company is not looking to make major acquisitions. This lays to rest investor fears that Rolls might return to Wartsila, which could have cost $8bn+. With a strong Trent-based civil engine growth story, Rolls is clearly focused on managing the cash costs of this, underlying operational performance, and preparing for the development of the next generation of narrow-bodied aircraft engines.

Last updated on 03/08/2015

Key management

Ian Davis, Chairman
John Rishton, CEO

Company address

65 Buckingham Gate
London
SW1E 6AT
United Kingdom
+44 (0) 20 7222 9020
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