Rolls-Royce Group (OTCPK:RYCEY) provides integrated power solutions. They build propulsion systems for aircraft, ships, oil and gas industry and also nuclear power. The Rolls-Royce Group is not to be confused with Rolls-Royce Motor Cars, which belongs to the BMW Group.
Rolls-Royce is one of the leading aerospace engine manufacturers and delivers to the major aircraft manufacturers.
This article is part of the aerospace industry article after the battle for leadership that Boeing (NYSE:BA) and Airbus (OTCPK:EADSF) wage, the third position for Bombardier (OTCQX:BDRBF) or Embraer (NYSE:ERJ) and comparing the military contractors Lockheed Martin (NYSE:LMT) and Northrop Grumman (NYSE:NOC).
Financial Data Sources
All financial data is from reports published by the Rolls-Royce Group. Notes on the (financial) data published:
- Exchange rate GBP/USD 1.60
- Stock price 19.97 USD / 12.48 GBP
(x 1m, with the exception of Dividend and EPS)
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- Higher revenue because of more deliveries;
- EBIT growth influenced by IAE restructuring, but lowered by R&D for Trent engines.
Rolls-Royce has a geographically well-spread customer base. North America, Europe and Asia each contribute a third of the revenue.
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- Order book lower because of budgetary cuts clients;
- EBIT higher because of less R&D, cost improvement and increased volume of spare parts.
Marine has an impressive EBIT%
- Order book increased with almost 50% for nuclear cores for the new British submarines;
- Increased demand from the oil and gas industry.
A cause for concern is the influence of foreign exchange rates on the results. On a yearly basis this can amount to hundreds of millions. It was the primary cause of the loss in 2008.
Rolls-Royce has good prospects for the future. A wide variety of products and a good geographical spread of clients provide continuity.
When viewed over the last years Rolls-Royce has turned from a company in problems (although in essence not caused by the business itself) to a growing, profitable company, despite the economic crisis and government budget cuts all over North America and Europe.
The turnaround is a true credit to Rolls-Royce's management, strategy and decisiveness.
Trading at a PE of 16, Rolls-Royce is not expensive:
- Well-led company;
- Big market position;
- Market with high entry barriers;
- Decent dividend.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.