Rolls-Royce @ 875.5p, -9.5p (-1.07%)
Rolls-Royce added its own jet powered boost to the FTSE's bounce on Thursday with a 56p gain on the day to 885p.
And despite a little breather on Friday when the share price gave up 9.5p to end the week at 875.5p it demonstrated a positive reception of the company's half year statement and the counter cyclical strengths of the aerospace industry with its established long lead times for investment.
Group Highlights:
- Order book of £60.1bn, up four per cent.
- Underlying revenue of £5.8bn, up five per cent.
- Underlying profit before tax of £637m, up seven per cent.
- First half payment to shareholders of 7.6 pence per share, up ten per cent.
- Completion of sale of share holding in International Aero Engines AG (IAE).
- Full year Group guidance confirmed.
Despite a seemingly subdued Farnborough, the company announced an increasing order book which now stands at £60.1bn!
This is reported net of the IAE stake sale.
Given current annual revenues of £11bn, that is approximately 5.5 years worth of orders give or take some movement between divisions: Civil; Defence; Energy; and Marine.
Revenues up 5% but profits were up 7% suggesting some benefit to profit margins which the company explains as "reflecting revenue growth, revenue mix, unit cost reduction and the contribution of Tognum".
My favourite net cash figure came in at £869m up from the 2011 year end figure of £223m following cash inflows from the IAE stake sale and the usual ebbs and flows of capital investment etc.
£869m is down on the 2011 half year figure though, which was £1451m, but this looks to be the result of the cash purchase of Tognum (50:50 joint venture with Daimler).
The company also suggests that Balance Sheet cash and equivalents is in the region of £3.15bn giving it plenty of opportunity firepower and control over its credit needs.
A 10% increase, to 7.6p, for the interim dividend which will be distributed in the form of C shares and the C share Re Investment Program (CRIP).
7.6p per share is estimated to cost just £142m.
The one bugbear being the length of time spanning declaration, ex-dividend, and payout which is as follows:
- 26 July declaration date
- 24 October ex-dividend date ie. shareholders need to be on the register at this date
- 4 January payment date.
In excess of 5 months.
On the news front the company has now completed the IAE stake sale and, through its 50:50 joint venture with Daimler, 100% of Bergen and 99% of Tognum.
All told, at 875.5p, and based upon consensus earnings growth of 17%, the shares stand on a forecast pe of 15.4 times 2012 earnings with a forecast yield of 2.3%.
Fair to say that there is a premium in the share price but not as much as has been the case in the past.
The shares have already hit an all time closing high of 897.5p this year which is beyond my full year target of 880p (Rolls-Royce Powers through the £1bn Profits barrier for the first time.), so unless the shares re-establish previous premiums I would expect the shares to consolidate this years performance until the full year results come into focus ahead of them being reported in February 2013.
In expectation, the company has re-iterated its full year guidance.
My investment in Rolls-Royce represents my portfolio's largest holding at around 33%, and over 31 months, is ahead some 79.42%, with further dividend income of 11.1% over that same period (June 2012: Portfolio Update.).
A total gain of 90.52% then.
Despite the over weighting of 33%, I have no plans to change my investment in Rolls-Royce.
So the shares are a very strong hold for me, supported by my view that they will be a corner stone of my portfolio for many years to come both in terms of share price gains and dividend contributions (My first dividend of 2012 (and 2011 dividends in profile).).
Related article links:
- http://www.sharecast.com: Rolls-Royce beats profits forecasts, maintains full-year guidance - UPDATE
- www.rolls-royce.com: ROLLS-ROYCE HOLDINGS PLC HALF-YEAR 2012 RESULTS
- www.rolls-royce.com: Group highlights
- www.rolls-royce.com: 2012 Half-Year Results Data pack
Related posts:
- Rolls-Royce Powers through the £1bn Profits barrier for the first time.
- June 2012: Portfolio Update.
- 2012 Dividend bull period update (to the update!).
- My first dividend of 2012 (and 2011 dividends in profile).
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