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

The last 18 months have proved to be particularly torrid for Rolls-Royce (RR), and it now needs to rebase and reset. New management appears keen to provide a more cohesive approach to the market, possibly with increased disclosure levels, but clearly with simpler messages and potentially more measurable milestones. The exact form of this should become more apparent at the investor day on 24 November. While the further reduction to FY16 guidance hurts sentiment, we believe the long-term cash generation of the civil model should remain the core investment factor. RR needs to build a conviction that it can convert its order backlog into real cash over time.

Last updated on 05/01/2016

Y/E Dec Revenue (£m) EBITDA (£m) PBT (£m) EPS (fd) (p) P/E (x) P/CF (x)
2013A 14634.0 2607.0 1759.0 65.6 7.9 4.2
2014A 13875.0 2418.0 1617.0 65.3 7.9 6.1
2015E 13639.7 2183.5 1349.5 56.0 9.2 6.1
2016E 13382.3 1604.7 738.0 30.8 16.7 6.3

Last updated on 15/12/2015

Latest research

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

Daily comment

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

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 the 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. Rolls is clearly focused on managing underlying operational performance to ensure cash realisation.

Last updated on 05/01/2016

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