Rolls Royce sees profits take off

Britain's Rolls Royce reported a 24 per cent jump in annual profits driven by strong performance in its civil aerospace unit.

Britain's Rolls Royce reported a 24 per cent jump in annual profits driven by strong performance in its civil aerospace unit.

Underlying pre-tax profits rose to £1.4bn in 2012, up from £1.1bn the previous year. It beat a £1.37bn estimate by a poll of 14 analysts at Thomas Reuters.

Revenues grew 8.0% to £12.2bn for the period while the order book climbed 4.0% to £60.1bn thanks to high demand for its Trent aircraft engines.

The newly-certificated Trent XWB engine will power the Airbus A350, while the Trent 1000-TEN will power Boeing's 787 Dreamliner from 2016.

Its civil aerospace business generated a 16% increase in revenues, boosted by soaring demand for more fuel-efficient engines for planes made by Europe's Airbus and Boeing.

The world's second-largest engine maker returned dividends of 19.5p per share, up 11% from 2011, as underlying earnings per share rose 22% to 59.27p.

The year-end cash position came to £1.3bn, up from £223m in 2011.

Average net debt for the year reached £145m, compared to net cash of £320m the previous year, reflecting the timing of the acquisition of marine and industrial engine group Tognum with joint venture partner Daimler in 2011 and the sale of interest in International Aero Engines last year.

Looking ahead, Chief Executive John Rishton said the company would concentrate on making engines for the civil and defence aerospace markets as well as turbines for the marine and energy sectors.

"In 2013, we expect modest growth in underlying revenue and good growth in underlying profit with cash flow around break even as we continue to invest for the future," he said.

He also said he did not expect the grounding of 500 of Boeing's Dreamliner jets to dent profits as the group continues to receive orders for its Trent 1000 engines in the production of the aircraft.

Analysts at Jefferies said the results were "just fine, on our view" but voiced concern about the cash flow guidance.

"That may prove a bone of contention in the short-term," the broker said.

"To that extent, the 2013 guidance bothers us, but we believe it demonstrates little other than that Rolls Royce is steadily getting into better shape and a very positive position for the medium-term."

It added that Rolls Royce add new factories and got production lines up and running to the required quality and efficiency standards.

Jefferies issued the company a 'buy' rating and a price target of 950p.

"One thing is for sure - we definitely do not want Rolls-Royce to be responsible for any delay to the A350 programme," it said.

Shares in the company fell 1.37% to 971.00p at 09:48 Thursday.

Alongside the results the company announced the appointment of Chairman Ian Davis who will replace Sir Simon Robertson following the annual general meeting on May 2nd.

RD

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