H1 23: RR may have finally found a bottom

After years of slippage, Rolls Royce may have finally found the bottom. H1 23 was marked by a 28% organic increase in revenues, a 531bp increase in operating margin and a sharp increase in cash generation, thanks to a higher activity level and the initial benefits of the multi-year transformation plan. Following these strong results, the company has upgraded its FY23 outlook.

Initial Equity Trading Comments - 11 May 2023

FY22: CEO’s optimism translated into the market’s optimism

Rolls Royce gained as much as 24% today, on the back of the earnings beat and renewed hope for a bright future following the new CEO’s ongoing transformation review. Pre-tax profit of £206m was double the market’s expectations and FCF improved by £2bn. FY22 adjusted income and FY23 guided operating profit are in line with our estimates and, hence, we will not make any significant changes to our current target price.

Q2 22: mixed signals

Rolls Royce published mixed figures. Profitability was particularly low, pushing the net result back into the red zone. However, FCF generation was a positive surprise despite the rise in inventory. It has finally found an agreement to sell ITP Aero and will use the resulting cash to repay its only floating interest rate debt.

Q4 21: RR misses consensus, Warren leaves, Putin starts a war, perfect…

Although RR has returned to growth in FY21, both sales and profitability have been disappointing. The resignation of Warren East after eight years as CEO will not help the stock, which saw its stock price fall as much as 18% today. The inflation in raw material and energy prices linked to Putin’s declaration of war won’t make the recovery of RR in FY22 any easier.

Mild trading update disappoints the market

Rolls Royce has announced a disappointing business outlook and a mild update of its activities as of 30 November. Though it has successfully managed to cut its costs and dispose of £1.8bn of assets, its boosted FCF guidance is a one-off that will be reversed in the future. In addition, the wide-body market situation is still discouraging.

Q2 21: impressive cost cutting

Rolls Royce delivered surprisingly high profits in its H1 results. Though revenues are in decline and below consensus, the cost-cutting efforts implemented in FY20 are paying off, with positive operating profits whereas the market was expecting slightly negative ones. It reiterated its confidence in the mid-term recovery of its civil aviation business with tangible targets.

FY20: results broadly in line and slow recovery in sight

Rolls-Royce beats estimates on revenue, but profitability missed expectations. In terms of guidance, the prospects are a tad gloomier than previously thought, resulting in a lower FCF expectation against the consensus for 2021. However, cash generation should improve materially by 2022 as the recovery along with restructuring actions pay off.

Cash generation still under pressure

Rolls-Royce issued a trading update as of November. The Defence business remained resilient while the situation in civil commercial aerospace was more contrasting. The recovery is still fluid, with a few uncertainties still to overcome in 2021 but visibility in 2022 should be better. Still, we see the cash generation capability of the company will remain under pressure.

FY19 figures above expectations, FY20 FCF target of £1bn confirmed

Rolls-Royce reported a better-than-expected set of FY19 results, beating expectations on the operating profit and FCF lines. The performance was largely driven by Aerospace. Management reaffirmed its £1bn FCF guidance for 2020. We were given litle detail about the 2019-nCoV outbreak, except an unquantified impact on air traffic growth in the near term. All in all, a good development in H2 19, but uncertainties remain in our view.

US productivity declines in Q3; Rolls-Royce expects FY19 to be towards lower-end of guidance; Senior implements restructuring programme

Rolls-Royce Holdings (RR. LN, £15.0bn) | IMI (IMI LN, £2.9bn) | John Wood Group (WG. LN, £2.5bn) | Senior (SNR LN, £788m)

Restructuring and T1000 issues remain a drag

RR’s H1 results were mixed. The charges related to both the ongoing restructuring and Trent 1000 issues remain a drag. Although management confirmed its full year guidance in terms of core operating profit and free cash flow, we stick to our negative view. The benefits are not yet visible and this is likely to remain the case through to 2021.

Good FY18 results, lackluster 2019 outlook

Rolls Royce reported better than expected FY18 results. Civil Aerospace and Power systems have experienced solid progress. The positive news also came from strong FCF at £641m, above consensus expectations. On the other hand, RR increased its T1000 charges by £236m due to customer disruption costs. RR posted encouraging results but the 2019 outlook is not surprising. We prefer to remain cautious on the stock at this stage.

Overtaking expectations but still in the heart of reorganisation

Rolls Royce reported solid FY results, coming in above expectations in terms of revenues, profit before tax and EPS. The bottom line has actually been supported by lower R&D costs while the gross margin deteriorated due to an unfavourable mix. The group has also seen its FCF strongly improving compared to last year, though remaining well below underlying profit. The outlook looks rather solid in terms of revenue growth, but still under pressure and uncertain in terms of operating margin.

Rolls Royce is on the right track

Rolls Royce reported a strong set of H1 results, boosted not only by a rising gross margin level but also by foreign exchange benefits. Organic revenue growth (+6% yoy) was driven by foreign exchange benefits (+5%). Drilling down into more detail shows that revenues from services posted the strongest growth (+8%) while OE revenues grew by 5% organically. The underlying gross margin grew from 16.8% to 18.2%. Profit before financing followed the same trend, rising from €158m to €345m thanks to the

Renold - Strong end to FY24: EPS up 11%. Robust FY25: EPS up 27.6%

The FY24 year-end update is very upbeat signalling trading being materially ahead of expectations, with a better-than-expected profit out turn and stronger cash generation. It continues to strengthen margins through efficiencies and investment in modern equipment. The order book remains close to record levels providing a robust view of future forecasts. In FY24E we upgrade EPS by 11% and in FY25E a significant upgrade of 27.6%. It looks capable of declaring a dividend in FY25 as well as manageme

Q1 Operating Results

Another Good Year of Diversified Growth with More to Come in 2024 CCapital have released their Q1 operating results. Overall, revenue has come in slightly lower than expected at $80.2m vs TamE of $85.9m but is largely tracking in line with our FY24 annual estimate and we note the company has maintained guidance. Drilling revenue for this quarter was impacted by a fall in utilisaztion rates as well as general remobilisation geographically but we expect a strong recovery throughout the year as k

Billington Holdings - Record result boosts dividend; forecasts upgraded

FY23 results show very strong growth over FY22, driven by strong Structural Steel activity, with results slightly ahead of upgraded profit expectations, while stronger than expected cash flow resulted in an unexpectedly generous dividend of 33p (offering a FY23 yield of 7.0%). The group now has net cash of £22.1m and is debt free and is therefore in a strong position for potential M&A activity. Following the recent £90m of new orders to increase the order book to record levels we conservatively

Morning Note – 16 April 2024

Plant Health Care - China distribution with AMVAC

Plant Health Care announced it has signed a distribution agreement with AMVAC, an American Vanguard Company, to support commercialisation of novel fertiliser products incorporating Plant Health Care's Harpinαβ in China starting in 2024. The novel product combines Harpinαβ technology with an AMVAC fertiliser and is expected to help growers improve crop quality and yield as part of an integrated and environmentally responsible crop production programme. AMVAC continues to evaluate Plant Health Car

Morning Note – 15 April 2024

discoverIE - Back to organic growth

discoverIE’s March year-end update confirms a strong operational performance in challenging markets. Following two years when sales increased by +48%, FY 2024 Group sales were +1% ahead of 2023 at CER (reported -3%) driven by a +2% contribution from acquisitions and organic -1%. As expected, organic growth returned in the later part of the year (Q4 +2%, +11% sequentially) and the order book has reverted to normalised levels of c.4.5 months’ sales, which – combined with a continuing strong pipeli

Severfield - Multiple positives should excite investors

Severfield’s trading update indicates that FY23 results are expected to slightly exceed market expectations and the company ends the year with a record UK and Europe order book. Furthermore, with a positive trading outlook and net debt coming in lower than expected, Severfield has announced a £10m share buyback, highlighting the cash-generative nature of the company and management’s confidence in its position. The stock trades on an FY25 P/E of less than 6x and yields 7%, which we believe appear

Warns on brine supply costs

SP Angel . Morning View . Copper prices hold higher as China processing fees fall below $0/t amid low feedstock availability

PROGRESSIVE: Severfield: Targeted acquisition strategy aids growth path

Acquisitions have been an important element of Severfield management’s growth strategy, with the aim of adding new products, sectors and regions to what we have identified as exciting long-term organic opportunities. In this Spotlight report, we focus on the group’s targeted M&A approach, highlighting three significant deals.

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

LIBERUM: Severfield: Erratum: Better EPS and cashflow, and buyback

Invinity Energy Systems - Update on Strategic Investment

Invinity’s update on discussions with strategic investors reveals interest from multiple parties. While this has slightly delayed finalising an agreement it increases the potential for a better outcome. Although details are unknown at this stage, we think there is enough in the statement to be comfortable that any agreements will be consistent with the company’s strategy of growing market share in core markets and using a licencing and royalty model in other markets.

Clean and competitive fertiliser