Rolls-Royce Hldgs reports 8.4% EBITDA growth and 1.3 pp EBITDA Margin growth from 14.8% to 16.1%

12 Feb 2016 • About Rolls-Royce Hldgs ($RR.) • By InTwits

Rolls-Royce Hldgs reported 2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is expanding: 16.1% in 2015 vs. 14.8% in 2014 vs. 13.3% in 2011
Rolls-Royce Hldgs has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.0%. At the same time it's a lot of higher than industry average of 2.9%.
CAPEX is quite volatile: 252 in 2015, 735 in 2014, 1,528 in 2013, 457 in 2012, 296 in 2011
The company has highly profitable business model: ROIC is at 15.3%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Rolls-Royce Hldgs ($RR.) key annual financial indicators

mln. £	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	11,124	12,161	14,642	13,736	13,725	-0.1%
Gross Profit	2,448	2,729	3,160	3,203	3,266	2.0%
SG&A	984	993	1,237	1,124	1,059	-5.8%
EBITDA	1,480	1,692	2,130	2,038	2,209	8.4%
Net Income	850	2,321	1,367	69	83	20.3%
Balance Sheet
Cash	1,310	2,585	3,990	2,862	3,176	11.0%
Short Term Debt	20	149	207	68	419	516.2%
Long Term Debt	1,184	1,234	2,164	2,193	2,883	31.5%
Cash flow
Capex	412	435	669	648	487	-24.8%
Ratios
Revenue growth	0.4%	9.3%	20.4%	-6.2%	-0.1%
EBITDA growth	5.4%	14.3%	25.9%	-4.3%	8.4%
Gross Margin	22.0%	22.4%	21.6%	23.3%	23.8%	0.5%
EBITDA Margin	13.3%	13.9%	14.5%	14.8%	16.1%	1.3%
Net Income Margin	7.6%	19.1%	9.3%	0.5%	0.6%	0.1%
SG&A, % of revenue	8.8%	8.2%	8.4%	8.2%	7.7%	-0.5%
CAPEX, % of revenue	3.7%	3.6%	4.6%	4.7%	3.5%	-1.2%
ROIC	18.4%	18.0%	15.8%	13.8%	15.3%	1.4%
ROE	20.0%	44.2%	23.6%	1.2%	1.5%	0.3%
Net Debt/EBITDA	-0.1x	-0.7x	-0.8x	-0.3x	0.1x	0.4x

Revenue and profitability

The company's Revenue showed almost no change in 2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 1.3 pp from 14.8% to 16.1% in 2015.

Gross Margin showed almost no change in 2015. SG&A as a % of Revenue showed almost no change in 2015.

Net Income marign showed almost no change in 2015.

Capital expenditures (CAPEX) and working capital investments

Rolls-Royce Hldgs's CAPEX/Revenue was 3.5% in 2015. Rolls-Royce Hldgs showed almost no change in CAPEX/Revenue from 2012 to 2015. It's average level of CAPEX/Revenue for the last three years was 4.3%.

Return on investment

The company operates at good ROIC (15.25%) while ROE is low (1.46%). ROIC increased slightly on 1.4 pp from 13.8% to 15.3% in 2015. ROE showed almost no change in 2015.

Leverage (Debt)

Debt level is 0.1x Net Debt / EBITDA and 1.5x Debt / EBITDA. Net Debt / EBITDA jumped on 0.4x from -0.3x to 0.1x in 2015. Debt jumped on 46.0% in 2015 while cash jumped on 11.0% in 2015.

Valuation

Rolls-Royce Hldgs's trades at EV/EBITDA 0.1x and P/E 1.9x while industy averages are 10.5x and 26.1x. The company's EV/(EBITDA-CAPEX) is 0.2x with the industry average at 4.7x.

Appendix 1: Peers in Aerospace & Defense

Below you can find Rolls-Royce Hldgs benchmarking vs. other companies in Aerospace & Defense industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Cobham ($85GU)			2.3%	3.5%	11.9%
Boeing Co ($BOE)		18.9%	6.0%	4.8%	5.9%
Qinetiq Group ($QQ.)		-13.7%	-9.6%	-41.1%	-2.4%
Chemring Group ($BC88)			-36.2%	-14.7%	-6.4%
Median (4 companies)	-12.1%	-7.2%	-0.3%	-3.7%	1.7%
Rolls-Royce Hldgs ($RR.)		9.3%	20.4%	-6.2%	-0.1%

Top companies by Gross margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Cobham ($85GU)		32.9%	31.8%	30.3%	32.0%
Chemring Group ($BC88)		25.4%	31.1%	31.4%	27.8%
Boeing Co ($BOE)	18.7%	16.0%	15.4%	15.4%	14.6%
Median (3 companies)	18.7%	25.4%	31.1%	30.3%	27.8%
Rolls-Royce Hldgs ($RR.)	22.0%	22.4%	21.6%	23.3%	23.8%

Top companies by EBITDA margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Qinetiq Group ($QQ.)	7.7%	28.8%	-5.4%	16.8%	17.9%
Cobham ($85GU)		20.5%	21.8%	13.4%	12.9%
Chemring Group ($BC88)		11.1%	-0.4%	16.1%	11.4%
Boeing Co ($BOE)	10.9%	9.9%	9.7%	10.3%	9.7%
Median (4 companies)	10.9%	13.1%	9.7%	13.4%	12.1%
Rolls-Royce Hldgs ($RR.)	13.3%	13.9%	14.5%	14.8%	16.1%

Top companies by CAPEX/Revenue, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Cobham ($85GU)		2.8%	3.2%	3.4%	4.7%
Qinetiq Group ($QQ.)	1.2%	1.5%	2.0%	3.1%	3.2%
Boeing Co ($BOE)	2.5%	2.1%	2.4%	2.5%	2.5%
Chemring Group ($BC88)		4.1%	2.6%	2.7%	2.2%
Median (4 companies)	2.0%	2.2%	2.4%	2.7%	2.9%
Rolls-Royce Hldgs ($RR.)	3.7%	3.6%	4.6%	4.7%	3.5%

Top companies by ROIC, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Boeing Co ($BOE)	33.4%	31.8%	25.4%	29.5%	38.9%
Qinetiq Group ($QQ.)	6.1%	44.3%	-17.2%	17.4%	26.8%
Chemring Group ($BC88)		4.9%	-6.3%	4.4%	1.4%
Cobham ($85GU)		13.9%	9.0%	2.6%	0.5%
Median (4 companies)	21.6%	26.3%	9.0%	17.4%	14.1%
Rolls-Royce Hldgs ($RR.)	18.4%	18.0%	15.8%	13.8%	15.3%

Top companies by Net Debt / EBITDA


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Cobham ($85GU)		1.0x	1.2x	4.9x	4.5x
Chemring Group ($BC88)		3.0x		2.1x	3.6x
Boeing Co ($BOE)	0.3x	0.0x	0.1x	-0.3x	-0.1x
Qinetiq Group ($QQ.)	2.1x	0.3x		-1.3x	-1.3x
Median (4 companies)	0.5x	0.3x	0.4x	0.5x	1.7x
Rolls-Royce Hldgs ($RR.)	-0.1x	-0.7x	-0.8x	-0.3x	0.1x

Rolls-Royce Hldgs stock price chart

Rolls-Royce Hldgs financials

mln.	FY2010	FY2011	FY2012

Revenue	11,085	11,124	12,161
EBITDA	1,404	1,480	1,692
Net income	539.0	850.0	2,321
CAPEX	354.0	412.0	435.0
Debt	1,852	1,204	1,383
Cash	2,859	1,310	2,585

About Rolls-Royce Hldgs

Rolls-Royce Holdings plc, together with its subsidiaries, designs, develops, manufactures, and services integrated power systems in the United Kingdom and internationally. The company operates through Civil, Defence, Power Systems, Marine, and Nuclear segments. The Civil segment provides commercial aero engines for various sectors of the airliner and corporate jet market, including civil large, small aircraft, and helicopter engines; and provides aftermarket services. The Defence segment offers military aero engines for combat jets, helicopters, transporters, trainers, tactical aircraft, and unmanned aerial vehicles, as well as offers aftermarket services. The Power Systems segment provides high-speed engines and propulsion systems for ships; heavy land, rail, and defense vehicles; and the oil and gas industry under the MTU brand. This segment also provides diesel gensets for emergency, base load, and peak load applications, as well as for cogeneration plants for the generation of combined heat and power based on gas engines or gas turbines under the MTU Onsite Energy brand; medium-speed engines for marine and power generation applications; and fuel injection systems for large engines. The Marine segment offers marine-power propulsion systems and aftermarket services. Its products include ship design and integrated ship systems, marine engine and propulsion systems, gas turbines, propulsors, bearings and seals, reduction gears, stabilization and manoeuvring products, deck machinery, automation and control products, and electrical power systems. The Nuclear segment provides nuclear systems for civil power generation and naval propulsion systems. Rolls-Royce Holdings plc was founded in 1971 and is headquartered in London, the United Kingdom.