Rolls-Royce Holdings PLC
 

Rolls-Royce Holdings Plc (LON: RR) is a London, United Kingdom-headquartered multinational engineering company with a focus on power and propulsion systems. It is one of the world’s leading industrial technology companies and seeks to deliver clean, safe and competitive solutions to a wide range of industries.

On 28^th February 2020, the company will announce 2019 full-year results.

Recent News
On 10th December 2019,Rolls-Royce Holdings announced that its Director Non-Executive, Bradley Singer, on 9th December 2019 had stepped down from his position.

Trading Update (as on 7^th November 2019)
The Group released the statement for the trading update post the half-year results, and for Trent 1000 update.Full-year Free Cash Flow and operating profit are expected to be on the lower end of the prior estimates announced by the group. Free Cash Flow would reach at least 1 billion pounds in the year 2020. All the Trent 1000 issues have been resolved as stated by the company, barring the exception of one design change, that is yet to be made.

Financial Highlights (for the six months to 30 June 2019)
In the first half of the financial year 2019, the company’s underlying revenue rose by 7 per cent to £7,353 millionas compared with the corresponding period of the last year, while reported revenue surged by 5 per cent to £7,883 million in H1 FY2019. Revenue surged because of an increase in the Underlying ITP Aero (up 23%), Civil Aerospace revenue (up 11%), Defence (up 2%), and Power Systems (up 6%). Underlying operating profit saw an improvement of 32 per cent from the previous year same period data. For the first half of 2019, underlying loss per share was 1.6 pence against the earnings per share of 2.5 pence in H1 FY2018, while reported loss per share stood at 48 pence in H1 FY2019.

Share Price Performance

Daily Chart as at December-27-19, before the market closed (Source: Thomson Reuters)

On 27th December 2019, Rolls-Royce Holdings PLC shares were trading at GBX 704.20 at the time of writing before the market close (at 12:45 PM GMT), up by 0.89% against the previous day closing price. Stock's 52 weeks High and Low are GBX 989.47/GBX 679.80. The company's stock beta stood at 1.08, reflecting the higher volatility as compared to the benchmark index.

Conclusion
Despite enhanced trading since the Half Year, the company anticipate the Full Year 2019 free cash flow and operating profit to be on the lower end of the prior estimates.In Defence and ITP segments, the company indicated a growth. In Power Systems division, while trading stays strong, a small number of larger projects have been deferred, and as a result, the group now anticipate sales growth for the financial year 2019 in the low- to mid-single-digit range.

The company expect to provide FCF of at least 1 billion pounds in the year 2020, underpinned by the operating efficiency enhancements, benefits of the restructuring programme, disciplined capital allocation, and further efforts to decrease inventory. After a period of substantial investment, the company stay devoted to delivering enhanced returns and will continue to invest in the innovation as needed to realise the long-term ambition to be the world’s foremost industrial technology company.

Over the course of 4 years (FY14 - FY18), the company’s revenue surged from GBP 13,736 million in FY14 to GBP 15,729 million in FY18. Compounded annual growth rate (CAGR) stood at 3.45 per cent.
Based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 698 (as on 24th December 2019).

EVRAZ PLC

EVRAZ Plc (LON: EVR) is an Industrial Metal company, having operations in the Czech Republic, Canada, Russian Federation, Italy, Kazakhstan and the USA. The company operates mining activities and is also amongst the top infrastructure steel producer worldwide.

Recent News
On 13^th December 2019, the company said that Laurie Argo has been appointed to the Company's Remuneration Committee.

On 2nd December 2019, EVRAZ announced the selection of Deborah Gudgeon as director (non-executive) of Highland Gold Mining Ltd.

Financial Highlights (for the third quarter of 2019)
In Q3, the company’s combined crude steel declined by 3.4 per centversus Q2 FY2019. Output was impacted due to capital repairs and lower volumes at EVRAZ ZSMK. The sales of total steel products remained flat for the period. The company saw a rise in semi-finished products sales by 5.6 per cent in Q3 FY2019 as against Q2 FY2019. The coking coal products external sales remained flat QoQ. The vanadium products sales surged by 9.8 per cent in Q3 FY19 versus Q2 FY2019, due to an increased demand in the China. The company declared an interim dividend for 2019 of US$ 508.17 million, while the current dividend yield was 22.78%.

Share Price Performance

Daily Chart as at December-27-19, before the market closed (Source: Thomson Reuters)

On 27th December 2019, EVRAZ plc shares were trading at GBX 405.10 at the time of writing before the market close (at 1:17 PM GMT), up by 2.32% against the previous day closing price. Stock's 52 weeks High and Low are GBX 710.20/GBX 339.19. The company's stock beta stood at 2.08, reflecting the higher volatility as compared to the benchmark index.

Conclusion
The decrease in the prices of commodities impacted the results in the first half of the year.The strength of the Russian steel market and the high level of vertical integration will continue to support the performance of the group. In the North American markets, the company was positively impacted by the removal of US Section 232 tariffs on aluminium and steel and retaliatory steel tariffs in Canada. However, the company remains focused on executing planned investment projects and implementing efficiency improvement initiatives to drive future growth.Company’s current dividend yield of 20.90% was comparatively higher as compared to its peers.Prices have also started to recover, helped by several measures implemented by the government to support the Chinese economy, which is expected to drive demand for products.

Over the course of 3 years (FY15 - FY18), the company’s revenue surged from $8,767 million in FY15 to $12,836 million in FY18. Compounded annual growth rate (CAGR) stood at 13.55 per cent.

Based on the above rationale, we have given a “Hold” recommendation at the closing price of GBX 395.90 (as on 24th December 2019).

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