Profits and dividends up, but the share price falls.
Record order book, and record underlying revenue and profit -- does that sound like a UK engineering company? Well, it is. It's Rolls-Royce Group (LSE: RR), which has just released its full-year figures for 2011.
The world's second largest maker of aircraft engines, which likes to boast that "a Rolls-Royce powered aircraft takes off or lands every 2.5 seconds", reported underlying pre-tax profit up 21% to £1.16bn, from £955m in 2010.
That was largely due to increased demand for new engines to power today's increasingly fuel-efficient planes, but was also boosted by the acquisition of German engine maker Tognum last year in partnership with Daimler.
Future business
With its order book groaning under the weight of record ongoing business -- there's £62.2bn of it lined up -- 2012 looks like being a good year, too.
Chief executive John Rishton said: "For 2012, we expect good growth in both underlying revenue and underlying profit with cash flow around breakeven as we continue to invest in future growth."
That profit came from underlying sales which grew by 4%, to £11.3bn, and the company will be paying a full-year dividend of 17.5p. That's up 9% on last year, and represents a yield of 2.3%. That might not sound like a great deal, but it is based on a 25% boost to earnings per share, at 48.5p, and Rolls-Royce does needs to re-invest for future business rather than paying out all its cash.
Defence spending down
With defence spending being somewhat tight these days, Rolls-Royce expects most of this year's profits to come from its civil aviation and energy divisions, and is hoping for some good business from emerging markets, too.
The share price has suffered due to fears of falling defence demand, but with 80% of business coming from the civil aviation sector, that does seem a little overdone. And the market reaction on the day, a 3% fall in the price, does not seem entirely rational to me.
But their shares are not a screaming bargain either, and a price-to-earnings ratio of around 16 seems like a fair long-term valuation to me -- it's a strong price for a strong long-term company.
> Here's your free Essential Investor Kit. Over the next few weeks, you'll get share ideas, a sector report and much, much more. Don't miss out!
More from Alan Oscroft:
