UPDATE: Record orders for Rolls-Royce in first half

28th Jul 2011 07:20

Rolls-Royce's shares edged higher on Thursday morning after the aerospace, power systems and defense group revealed record orders in the first half while profits jumped 28% to beat expectations, enabling it to up its payout to shareholders.Shares rose 0.78% to 646.50p at 11:25.Rolls-Royce reported a record order book of £61.4bn, up 4% over the year, helped by a 60% jump in first half new orders which totalled £8.7bn."This order book and our strong market position reinforce our belief that the group's revenues will double in the next decade through organic growth alone," the firm said.Underlying pre-tax profit rose from £465m in 2010 to £595m this year, helped by a larger installed base, better revenue mix, currency movements and better productivity, the firm said. This figure beat Charles Stanley's expectation of £552m. Earnings per share jumped from 18.72p to 23.89p, well ahead of estimates of 21.9p.The half-year payment to shareholders rose 8% from 6.4p to 6.9p.While underlying revenues grew by 4%, reported revenues edged 1% lower from £5.42bn to £5.36bn, as a 25% fall in Marine original equipment (OE) revenues offset strong growth in Civil Aerospace.Nevertheless, group revenues are expected to grow modestly in 2011, driven by strong OE growth in Civil Aerospace and Defence Aerospace. However, it is anticipated that this growth will be partly offset by the slowdown in Marine."Our impression of the 1H11 result and the outlook comments is that Rolls-Royce is essentially on course," said RBS analyst Sandy Morris."With activity on new aircraft engine programmes starting to rise and new production facilities coming on stream, there must inevitably be some associated launch costs and start-up costs, but momentum is building. Further, we now firmly believe that OE demand in the Marine division has begun to recover," Morris said.The broker stays positive with a buy rating and 750p target price.Meanwhile, the group, which recently was given the all clearance by the European Commission to proceed - along with car manufacturer Daimler - with its proposed takeover of engine supplier Tognum, said that the joint venture will be equity-accounted and will have no impact on revenues in 2011. However, the associated net funding costs are expected to broadly offset any 2011 operating profit benefit.BC