Rolls-Royce (RR)

Business description

Rolls-Royce designs, develops, manufactures and services power systems for air, land and sea use. It is one of the world’s leading aero engines suppliers for large civil aircraft and business jets, and second in military engines and services.

Investment summary

Rolls-Royce’s FY15 results soothed market nerves as it continues to work through its current investment phase. The current shortfall in cash flow is being addressed, and longer-term cost savings potential of up to £1bn are being reported. We believe the strength of the core civil engine model should ultimately reassert itself, lifting equity value towards significantly higher cash valuations. Management is providing a more cohesive approach to the market, with increased disclosure levels, simplified messages and measurable milestones. RR needs to build a conviction that it can convert the burgeoning order backlog into real cash.

Last updated on 01/06/2016

Y/E Dec Revenue (£m) EBITDA (£m) PBT (£m) EPS (fd) (p) P/E (x) P/CF (x)
2014A 13864.0 2312.0 1617.0 65.3 10.9 8.5
2015A 13354.0 2108.0 1432.0 58.7 12.1 11.1
2016E 13175.0 1341.0 607.0 24.4 29.2 11.4
2017E 13464.0 1592.0 833.0 33.5 21.2 8.8

Last updated on 19/05/2016

Latest research

Derby trials

Update | Aerospace & Defence | 11/04/2016

Restoring power and cash flow growth

Update | Aerospace & Defence | 11/12/2015

Power cut

Update | Aerospace & Defence | 18/11/2015

Daily comment

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

Daily comment

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

Daily comment

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

Daily comment

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

Daily comment

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

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

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

Daily comment

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

Daily comment

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

Daily comment

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

Latest video

Executive Interview - Rolls-Royce

Industry outlook

Widebody aircraft deliveries are rising sharply through the end of the decade, with Rolls-Royce’s increasing market share the driver of longer-term cash generation growth. Older aircraft utilisation rates are dropping as new, more efficient aircraft are delivered, and a reduced share in regional and corporate jet markets also currently act as a drag on performance. Offshore marine markets are depressed by lower oil & gas investment levels, but naval, power, nuclear and defence markets remain more stable at present. RR is clearly focused on managing underlying operational performance to ensure cash realisation.

Last updated on 01/06/2016

Key management

Ian Davis, Chairman
Warren East, CEO

Company address

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