Rolls-Royce profits ahead of forecasts
Rolls-Royce reported profit ahead of expectations for the full year, as the diversity of its portfolio and early cost reduction helped shore up revenues.
The markets had been expecting pre-tax profits to come out at approximately £860m. As it was, they lifted to £915m, from £880m for the year to 2008. Revenues rose 12.8% to £10,414m. The group also improved its net cash position from £260m to £635m and will pay a dividend of 9p per share, up 5%.
Rolls-Royce said that 2010 profits would be broadly similar to those in 2009 as the trading environment remained ‘difficult’ with continuing uncertainty on the strength of demand. It said that there had been short-term delays in some of its major programmes, including the Airbus 380, the Boeing 787 and the Airbus A400M, but once these were on stream they should provide visibility of earnings for several decades.
Revenues were boosted by the breadth of the group’s operations. 56% of revenues now come from outside civil aerospace. The group has seen growth of 19% and 17% in its defence and marine businesses respectively and a 36% increase in its energy business.
The shares rose 1.6% to 496.6p in early trading. They have risen 63.5% over the past 12 months, well ahead of the wider FTSE 100 as the market has favoured cyclical stocks. The company had a few notable wins this year, including a contract with French utility EDF Energy to provide engineering and technical support for the UK's four new nuclear power stations, and its exposure to developing markets is likely to stand it in good stead. The only worry would be on valuations. The share price has moved up a long way and now stands on 13.6x earnings. It’s not expensive, but upside may be limited.
