Rolls-Royce expects 'good' growth this year

Power systems group Rolls-Royce saw moderate growth in both underlying revenues and profits in the first half and said that it expects 'good' growth across 2012 as a whole, though it did experience weakness in the Marine and Energy markets.

By MoneyWeek

published 26 July 2012

in Features

Underlying revenue increased by 5% from £5.46bn to £5.76bn, helped by 5% growth in underlying OE revenue (£2.72bn) and 6% growth in underlying services revenue (£3.04bn).

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Services revenue saw strong growth in Civil Aerospace and Defence Aerospace (both up 10%) and Energy saw a good growth. However, Marine was down 6% due to deferrals of maintenance activity by customers and lower spares spend.

Meanwhile, underlying pre-tax profit was up 7% from £595m to £637m, reflecting revenue growth, revenue mix, unit cost reduction and the contribution of Tognum.

The interim dividend per share was raised by 10% from 6.9p to 7.6p. Net cash at the end of the period stood at £869m, up from £223m the year before.

"Rolls-Royce has delivered solid growth in underlying revenue and underlying profit in the first half of the year. We continue to invest to support future growth, including our new production facility in Singapore, a new turbine blade casting plant in the UK, a new stator facility in the USA and a new assembly plant for our Energy business in Brazil," said Chief Executive John Rishton.

While the order book increased by 4% from £57.6bn to £60.1bn - helped by 4% growth to £49.4bn in Civil Aerospace and 44% growth to £3.9bn in Marine - the Defence Aerospace order book declined by 8% to £5.5bn as a result of budgetary pressures on its major customers in Europe and North America. The Energy order book also fell by 7% to £1.3bn.

"For the full year, we continue to expect good growth in underlying profit with cash flow around breakeven, excluding the positive impact of the Tognum acquisition and the sale of our equity stake in IAE," Rishton said.

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