Rolls-Royce 2010 Final Results

As at 11:00am:
Rolls-Royce @ 647.5p, -8 (-1.22%)

Well the scores are in and Rolls-Royce has just about beaten consensus expectations for the last financial year.
Headline numbers read as follows:
- Underlying profit before tax £955m (+4%) v. expectations of £940m
- Underlying revenue £10.8bn (+7%)
- Balance sheet cash £1.533bn (+£258m)
- Dividend increase of 6.7% to 9.6p bringing the full year payment to 16p
- Quantas incident charged to 2010 at £56m although "a modest level" of additional cost is expected to be in the 2011 results.

Not the most thrilling results but given the faltering global economy and the Quantas A380 / T900 incident, it seems churlish not to be pleased that the company has consolidated its financial strength in the last 12 months in spite of the potentially damaging incident. Increasing cash balances and a modest increase to dividends provide support to the promise of more to come from the company's position on the wide body programs for: Boeing 787, Airbus A380, and Airbus A350.

The following statement taken from the results is quite promising and gives me some confidence in the long term that Rolls-Royce can continue to grow:

"Group prospects:

.... The strong order book and balanced portfolio gives us confidence that the Group will double revenues organically over the next decade. We continue to have the management and financial capacity to accelerate growth through acquisition and partnership."

On the downside, the company quotes continuing uncertainty around some of its defence work particularly the F135/F136 second engine option.

The results come on the back of widespread industry optimism with the airframe manufacturers: Airbus and Boeing, both looking forward to increasing production in the next year. In turn, both GE and United Technologies (P&W), reported recently and were positively received.
So it still seems to me that the company is in a position to benefit from the recovering aerospace cycle which may take a little time to be fully appreciated. It is also unfortunate timing to coincide with the BoE's Monetary Policy Committee meeting to determine interest rates which is pressuring the FTSE today.
Still a hold for me. 

FTSE 100 @ 6006.02, -46.27 (-0.76%)


To download the full results from Rolls-Royce's website:rolls-royce.com: Rolls-Royce Group plc 2010 Full-Year Results