Tuesday, 30 July 2013

BAE Systems F35 orders



A global defence, aerospace and security company. BAE Systems delivers a range of products and services for air, land and naval forces, as well as advanced electronics, security, information technology solutions and support services.  I have a holding in my income portfolio (epic code: BA.)

 

 

 

 

Lockheed Martin and the DOD have reached agreement on orders for the next two batches of F-35 fighter jets, a deal worth over $7bn.  This will be good news for BAE Systems who are a major sub-contractor on this programme.  The agreement covers 71 aircraft, with 60 for the U.S. military, and 11 for Australia, Italy, Turkey and Britain.

BAE Systems has the lead in manufacture of the aft fuselage, vertical and horizontal tails and wing tips, and responsibility for the fuel system, crew escape, life support, prognostics health management integration and UK aircraft carrier integration support.  It also plays a key role in many other parts of the programme.
 
 
Click on picture to enlarge
 
 
 

Monday, 29 July 2013

Reckitt Benckiser interims


Reckitt Benckiser Group is a manufacturer and marketer of branded products in household, health and personal care products, sold into nearly 200 countries from operations in over 60 countries.  I have a holding in my income portfolio (epic code: RB.) 



Reckitt Benckiser announced their interim results to 30 June 2013 today.  Total Net revenue grew by 6% to £4,994m, with like for like growth of 5% and 6% if we exclude the pharmaceutical business (RBP). 

Operating profit was £914m down 15%, if we exclude exceptional costs relating to historical regulatory issues of £225m and restructuring costs of £24m, then adjusted operating profit of £1163m was up 3%.  They achieved a strong gross margin improvement of 230bps to 58.7% and adjusted operating margin (ex RBP) was up 10bps to 20.4%.

EPS was 90.4p down 14%, but excluding the exceptional costs mentioned in the above paragraph adjusted EPS was 118.3p up 7% on last year.

Free cash flow (FCF) was once again strong at £893m compared to £788m last year, although net debt increased from £2,387m at the year-end to £2,810m at 30 June.  The increase in net debt was mainly due to payments for share repurchases of £279m, payments for acquisitions in China & Latin America of £413m and payment of last year's final dividend of £561m from the FCF.  Gearing at the period end is 46.6% compared to 34.6% last year and 40.3% at 31 December 2012.

The company has increased the interim dividend by 7% to 60p.  This may be a marker that the final dividend may see a similar increase, which would place the full year at say 143p delivering a 3.1% yield on the current share price.

There has been some concern over the sales of Suboxone film, after CVS Caremark dropped the product in favour of the generic tablet form (RB. stopped marketing the tablet form of Suboxone in March of this year).  CVS Caremark were not contracted to RB., so were a rather special case and RB.'s market share of buprenorphine prescriptions in the USA has been maintained at about 64%, although they do expect erosion of their share over time.  I would expect a sale of the pharmaceutical business to a more appropriate parent over the next 2-3 years, once the market has stabilised between RB.'s film and the generic tablet form. 

RB. stated that they have medium term targets to have emerging market sales representing 50% of the core group sales by 2015 and Health & Hygene to represent 72% of core group sales by 2015.  At the half year, emerging markets were 45% and Health & Hygene 72% of the core.  

Management are confident that they can achieve full year total revenue growth at the upper end of the previous guidance of growth in a 5-6% range (ex RBP), while maintaining adjusted operating margins.

These are good results from a well managed business and some initial concerns when Rakesh Kapoor  took over the CEO role from Bart Becht in 2011 have been proved to be unfounded.  Kapoor has instigated some major changes, so that it is a more decentralised organisation with a higher emphasis on emerging markets.

Friday, 26 July 2013

Spectris interims

Spectris

Spectris develops and markets productivity-enhancing instrumentation and controls.  Operating in four segments - Materials Analysis, Test & Measurement, In-line Instrumentation and Industrial Controls.  I have a holding in my growth portfolio (epic code: SXS)



Spectris announced their half year results today, which although not particularly good reading, was a substantial improvement on their first quarter IMS.

On a reported basis sales for the half-year at £570.4m declined by 4.4%. On a continuing basis sales declined by 1% and excluding acquisitions by 3%.  This is an improvement over the first quarter, as second quarter sales increased 3% on a LFL basis.  Sales declined across all territories with the exception of ROW, the chart below shows the spread of sales geographically for the half year, compared to the spread last year:

Click on chart to enlarge
  

Adjusted operating profit was £80.1m a decline of 14% on the same period last year, adjusted EPS declined 12% to 48.4p, although the interim dividend was increased by 9% to 14.75p, underlining managements confidence of growth for the full year. 

Free cash flow at £34.1m was less than last year's £56.2m, but due to the sale of the subsidiary Fusion UV, an additional £106.1m of net cash was received during the period, helping reduce net debt by £97.1m from the year-end to £145.2m, producing a decline in gearing from 35.0% to 17.8% at the half-year. 

Trading improved during the second quarter across all segments. Management say they remain encouraged by the strong overall level of their opportunity pipeline, which probably implies a weakness in their current order book, they also state that trading continues to be characterised by longer order cycles.    

They do have in place an annualised £10 million of net cost savings initiated during the first quarter, that will improve the second half results.

They believe that their businesses are strategically well positioned and, assuming the improved trading conditions seen in the second quarter continue, they are confident that they will deliver full year performance in line with its expectations.  The chart below shows the share of group sales by segment along with the markets they address and, like the geographic split, is evenly spread:

Click on chart to enlarge


Market expectations are for EPS of 137p for this year and 147p for 2014, valuing the business on 15 times this year's earnings and 14 times next year.  Spectris is a business that in the past has produced strong earnings (with the exception of 2009, as customers cut spending at the start of the global economic downturn ) and strong cash flow conversion (including 2009), with a return on equity (with the exception of 2009) above 20%.  As has been evidenced this year, with the £10m cost reduction programme, management are quick to react to any threats.  Over the past 5 years Spectris has grown earnings and cash flows by over 15% pa and dividends by over 12% pa., a strong record, with the directors owning a reasonable stake, ensuring an entrepreneurial focus.

Pearson interims

Logo NO STRAP BLUE 280

An international media and education company, providing educational materials, technologies, assessments and related services to teachers and students.  Owner of The Financial Times and part owner (47%) of Penguin Random House.  I have a holding in my income portfolio (epic code: PSON).




Pearson announced their interim results today.  Sales on continuing operations were £2,243m up 5% and at constant exchange rates growth was 3% with underlying growth of 1%.  North America Education performed well, with sales up 5% and developing markets growing by 9%.  Also of note was the 14% increase in FT digital subscriptions.  Penguin that was sold to the joint venture Penguin Random House on July 1 2013, grew sales at an underlying rate of 6% (16% on a reported basis) to £513m.   
 
Operating profit was £20m compared to £50m last year and on an adjusted (eliminating amortisation of intangibles and acquisition costs) and continuing basis was £109m down 34% from last year, partly due to £29m of restructuring charges.
 
Net debt has increased by £867m, mainly due to negative free cash flow of £370m and payment for £242m of dividends, this leaves gearing at 36% compared to 21% at the year end.
 
The interim dividend was increased by 7% to 16p.
 
The company has initiated a process to explore a possible sale of Mergermarket that provides financial intelligence, data and analysis to the M&A market.
 
In one of the most dramatic positive improvements I've seen over such a short period for defined benefit pension plans, the overall deficit on the UK group plan of £19m at the end of 2012 has become a surplus of £99m at 30 June 2013.
 
Their guidance for the year essentially remains unchanged; excluding the accounting treatment relating to Penguin Random House, where in the future it will be dealt with as an associate.  They continue to expect adjusted EPS to be broadly level with 2012 (82.6p) before expensing £100m of net restructuring costs.



Bhp Billiton EWS project

BHP Billiton

A diversified natural resources company and among the world’s largest producers of major commodities, including aluminium, coal, copper, iron ore, manganese, nickel, silver and uranium, and has substantial interests in oil and gas.  I have a holding in my income portfolio (epic code: BLT).



BLT announced yesterday that they have approved an investment of US$1,972m to sustain operations at Escondida in Chile, by constructing a new 2,500 litre per second sea-water desalination facility. 

BLT operate the Escondida copper mine in partnership with Rio Tinto and JECO; BLT's share of the mine is 57.5% and the investment is their share of the cost.  Work will commence this month and is expected to complete in 2017.

Escondida is located 3,100 meters above sea level in the Atacama desert, 170km South-East of the City of Antofagasta.


Thursday, 25 July 2013

Synergy Health IMS

Home

Delivers a range of specialist outsourced services to healthcare providers and other clients concerned with health management. Such as hospital sterilisation services; applied sterilisation technologies for single-use medical devices; reusable surgical solutions for daily delivery of sterile reusable gowns and towels; clinical pathology, toxicology and microbiological services; chemical and microbiological analysis; linen management services for healthcare facilities and product solutions designed for infection prevention and control, patient hygiene, surgical procedures and wound care.  I have a holding in my growth portfolio (epic code: SYR)



Synergy Health issued their IMS this morning, declaring that revenue for the three months to 30 June 2013 increased by 21.9% to £96.6 million.  This includes the effects of currency and acquisitions, excluding theses items they state that organic growth "...is in line with last year...".  I am assuming that this means that there was no organic growth, rather than organic growth was the same as last year's 2.4%.  This is not a particularly clear statement.

They state that there has been a slightly slower start to the year, with US healthcare volumes static as a result of structural changes in the market filtering through from the Patient Protection and Affordable Care Act, together with the continued impact of austerity measures in the UK and Europe.

Operating margins for the quarter were ahead of plan, despite increased investment in business development.

The result of this is that trading for the quarter has been in line with management's expectations.

After a good set of full year results announced in June, this slow start to the year will likely pull back the share price over the next few days.

In addition to the IMS, board changes were announced.  After 11 years serving as non-exec Chairman, Sir Duncan Nichol announced that he will retire on 31 March 2014. Dr Richard Steeves, the Group CEO, will succeed himDr Adrian Coward, the Regional CEO for the UK and Ireland for the past 3 years will step up to take over as CEO. 

Unilever interims

Unilever Logo

A manufacturer and supplier of fast moving consumer goods, with more than 400 brands focused on health and wellbeing, 14 of which generate sales in excess of €1 billion a year. I have a holding in my income portfolio (epic code: ULVR).



Unilever announced their interim results today, for the period to 30 June 2013.  Turnover was up 0.5% to €25.5bn; adjusting for foreign currency and disposals, underlying growth was 5%, with emerging markets growing by 10.3%.  Of the 5% underlying sales growth 2.6% was due to volume. Operating profits were €3.9bn up 14% (18% at constant currencies), reflecting stronger gross margins up 120bps, that they attribute to profitable innovations, an improving mix and continuing to apply a rigorous approach to supply chain costs and savings.

Core EPS was up 4% to €0.76 and reported EPS up 14% to €0.83.  Dividend for the second quarter will be 23.12p per share a 22% increase on last year, partly due to Euro strength, as the Euro dividend was increased by 10.7%.  Free cash flow was €1.3bn, compared to last year's €1.5bn, this does not yet reflect the €2.1bn that will be paid to shareholders of Hindustan Unilever (HUL) that accepted ULVR's open offer. 

Net debt was €11.6bn up from €7.4bn at the year end, due in the main to accounting for the maximum liability of the HUL offer of €3.8bn. Since fewer HUL shareholders accepted the open offer, the net debt if adjusted for this would be €9.9bn (maximum value of the offer was €3.8bn, $2.1bn accepted).  So the adjusted gearing would be 76.7% still a substantial change from the 48.5% at the December year end.

They caution what is a good performance in their markets by stating that growth is slowing in emerging countries, as macro-economic headwinds influence consumer behaviour.  For developed markets they mention that they remain sluggish with little sign of any recovery in North America or Europe.

Unilever's overall underlying sales growth of 5% is still ahead of their main competitor P&G, who are in a 3-4% growth range and expect to remain there for their fourth quarter to June 2013, due to be announced in early August. 

Globo trading update




A technology innovator delivering mobile, telecom and e-business software products and services. I have a holding in my growth portfolio (epic code: GBO).



Globo issued a trading update for the six months to 30 June.  They have maintained strong revenue growth momentum and reported that sales for the period increased by 51% per cent year-on-year in the first half of 2013 to approximately €32m, ahead of market expectations.  They also expect that EBITDA and PBT will be slightly ahead of market expectations

They are seeing on-going demand for their GO!Enterprise platform, which recorded  revenue growth of 133% year-on-year to €10.2m and their consumer mobility products (CitronGO! and GO!Social) which recorded revenue growth of 22% to €17.9m.

In line with normal seasonality favouring the second half, the Group anticipates revenues and margins will continue to increase over the remainder of the year. 

Unfortunately this business is still burning cash; they have net cash of €9.2m after consuming €4.5m over the six month period.  Until this reverses any substantial share price re-rating will be constrained. 

 

Halma IMS

Halma p.l.c

Designs, manufactures & markets equipment for process safety, infrastructure safety, medical and environmental & analysis.  Typical products include - fire detectors, gas detectors, water treatment systems, ophthalmic instruments and machine safety systems.  I have a holding in my income portfolio (epic code: HLMA).


Halma released their interim management statement today, stating that revenue during the first quarter was 13% ahead of last year including 6% organic growth at constant currency.  This compares to growth for the whole of last year of 7% and 3% for organic growth at constant currency. 
 
Order books have been increased from the year-end, with order intake at 103% of revenue. They further stated that trading since the start of the financial year has been in line with the Board's expectations.
 
A very good start to the year, from a company that rarely disappoints.

GlaxoSmithKline interims

Home

A global healthcare company that develops, manufactures and markets pharmaceutical products, including vaccines, over-the-counter (OTC) medicines and health-related consumer products.  I have a holding in my income portfolio (epic code: GSK). 



GSK announced their 2nd quarter and interim results yesterday, which were somewhat overshadowed by the on-going Chinese probe into bribery and corruption by the company and its likely affect on the business.  As to the results, total Group turnover for the second quarter 2013 was £6,618m, up 2% and for the half-year was flat at £13,089m, although for the half-year adjusting for the impact of disposals, turnover grew 2%.
 
Core EPS of 53.2p decreased 1% in CER terms, although reported EPS declined 19.2% to 40.9p.  The second quarter dividend is 18p a 6% increase, making 36p for the half-year and the company stated that total share repurchases for the year are expected to be £1-2bn.
 
As was announced in mid June, the company mentioned that it has received an offer from Aspen Group for two anticoagulant products and the related manufacturing site, the additional information was the value of approximately £700m .  They mentioned that their plan to divest the drinks brands, Lucozade & Ribenna, remains on track and they expect to reach an agreement by the end of the year.
 
Free cash flow (FCF) for the six months was £2,012m 23% down on last year.  It is worth noting that FCF has declined for three straight years, although due to a weak performance in the second half of last year, this year may see the first increase since 2009.  They stated that their commitment is to use free cash flow to support increasing dividends, share repurchases or, where returns are more attractive, bolt-on acquisitions. 

In my opinion one of the strengths that GSK possesses is their "know how" in inhaled  medicines. The result of this is clear from the performance of  Advair/Seretide; patent protection was lost in the USA back in 2010 and yet it continues to grow by 8% in the USA in both the second quarter and the six months.  It seems that although, for generic companies, copying pills is complex but possible, inhaled drugs require a whole set of new skills that many of them do not have.  Next to be released in this area is Relvar/Breo Ellipta approved by the FDA in May of this year, a once a day treatment for respiratory conditions.  In contrast to this is Astra Zeneca, where their exposure to inhaled medicines is about half of GSK's and their decline in sales due to patent expiries is far more marked.
 
Finally, GSK's guidance for 2013 was reconfirmed as core EPS growth of 3-4% CER with turnover growth of around 1% CER.

Wednesday, 24 July 2013

Compass Group IMS

Compass Group


Provides contract food, catering and support services to a wide range of commercial businesses and government departments operating in over 50 countries.  I have a holding in my income portfolio (epic code: CPG).



Compass Group issued their third quarter IMS today. They delivered another good performance in the third quarter of the year and their overall expectations for the full year remain positive and unchanged.

Organic revenue growth in the quarter was 4.0% on a comparable working days basis (5.2% reported organic revenue growth); this compares to organic revenue growth on a comparable working day basis of 4.8% at the interim stage.  Consequently for the nine months to 30 June 2013, organic revenue growth has been 4.5%.

By geographic area, organic revenue growth in North America was 7.7% (8.2% at the interim stage), Fast Growing & Emerging markets grew 10.0% (10.5%) and Europe and Japan, still experiencing difficult conditions in addition to the added affect of the company withdrawing from some uneconomic contracts, declined by 3.4% (3.6%). 

They also mentioned that they have increased the operating profit margin by 20 basis points in the quarter, this follows the15 basis point increase at the interim stage.

They appear well on course to achieving their full year EPS expectations of 47p.
 

PayPoint IMS



Provides clients with specialist consumer payment transaction processing and settlement across a wide variety of markets: (energy pre and post-payment, telecoms, housing, water, transport, e-commerce, parking and gaming) through its retail networks, internet and mobile phone channels. I have a holding in my income portfolio (epic code: PAY).



PayPoint issued their interim management statement today.  They stated that transactions processed for the 91 day period since year end were 180 million, this was up 6% on a pro-rata basis comparing it to the equivalent 91 day period last year. Revenues of £51 million were up 3% on a pro-rata basis.

Their JV with Yodel in Collect+ saw volumes increase by 72% to over 2.8 million transactions in the period. They have introduced a new standard two day delivery service in addition to the economy 3-5 day service and increased the number of sites offering Collect+ since the year end by 202 to 5,457.

Net cash at 30 June was £40.8m, compared to £39.6m at 31 March 2013. The final dividend of £13.7m and the special dividend of £10.1m are due for payment on 25 July 2013.

Finally they stated that overall trading for the period to 30 June 2013 was in line with market expectations, taking seasonality of trading into account.

Since I last posted on PayPoint on 23 May, the shares have increased over 21% to 1110p so that they appear to be fully valued at 22 times this year's earnings and 20 times next year's.  To justify this valuation on a discounted cash flow basis, they will need to grow free cash flow by 13% pa for the next 10 years and I have then assumed 2.5% growth in perpetuity and discounted the resultant cash flows by 11%. 
 

Monday, 22 July 2013

Dialight interims

Dialight

Supplier of light emitting diode (LED) solutions for industrial users. Applying leading edge LED technology, it produces retro-fittable lighting fixtures designed specifically for hazardous locations, obstruction signals and traffic signalling.  I have no holding in this company (epic code: DIA). 



As I mentioned in my previous post, DIA announced their interims today.  In summary the growth in the Lighting division (70%) was better than I was expecting and the decline in the Signals division (21%) worse than I was expecting.  They also comment that the Obstruction part of the Signals Division declined by more than 40%.

The affect on operating profit is detailed in the table below:


Click on table to enlarge
 








DIA have stated in their presentations that Lighting is the "engine for growth" and these results clearly demonstrate that, but the drag on profits from a poor performing Signals division must be reversed.  Although the volume decline in Signals was worse than I was expecting, the decline in contribution margins by 860bps required some explanation that was not forthcoming.  I am assuming that this was caused by initial minimum commission payments to the newly recruited sales force in the USA.  This would be a temporary situation and is not unusual when recruiting established sales professionals.  It would be good to know that this is the case, rather than price erosion due to the increased competition that was mentioned in their prelims presentation.

The SP is up just under 3% on these results, but it will take sometime for the market to digest them . The final paragraph in their outlook states "...The results for the year will be impacted by the transition of the obstruction business in the first half. The timing of the award of new contracts in Obstruction is uncertain. Despite this the Board believes that the results for the year will be in line with the range of market estimates..."  Which adds an element of uncertainty and, if the Signals division situation is a case of volume and margin erosion, then Lighting and Components will be unlikely to compensate for the full year.

It is worth looking at the results by division for the trailing twelve months (TTM) comparing this to the 2012 results; it is clear without a substantial recovery in Signals it is difficult to see them meeting market estimates of about £24m PBIT (excluding discontinued).  It is also worth noting that although the Lighting division had a good set of interims, their profits were not as good as the second half of last year, so they have some challenging comparatives coming up.


Click on table to enlarge



 
This will still be an interesting company to track but, with the temporary problems they have, there may be better opportunities for an entry, with possibly less risk.

Sunday, 21 July 2013

Dialight growth portfolio candidate

Dialight

Supplier of light emitting diode (LED) solutions for industrial users. Applying leading edge LED technology, it produces retro-fittable lighting fixtures designed specifically for hazardous locations, obstruction signals and traffic signalling.  I have no holding in this company (epic code: DIA). 




Market/Index
FTSE 250
Industry
Homebuilding & construction supplies
Sales
£115.1m
Earnings
£13.6m
Market Cap
£347.4m
Share Price
1075p
Norm. EPS
41.3p
Historic P/E
26.0
Est. 2013 growth
25.2%
Prospective P/E
20.8
Est. 2014 growth
27.9%
Prospective P/E
16.3
Rolling PEG
0.67
SGR
16.2%
PBV
5.5
Historic Yield
1.26%
ROE
22.8%
Operating Margin
17.0%
5 yr BV + Div return
19.5%
5 yr FCF return on BV
11.2%


Dialight is worth adding to a watch list of potential candidates for a growth portfolio.  It fails on my growth screens on 1 year relative strength, this is due to  confirmation in June that sales within their Signals division (41.8% of sales) will show a decline at the half-year compared to last year, although the Lighting division (39.5%) is expected to grow by over 50%. 

The problem in the Signals division is due to contract delays and, the change to direct selling in the US rather than through agents, which will take time to develop through the transition, but will ultimately provide better control and market intelligence.  These problems should be of a temporary nature, but due to the effect on the share price, offer the potential of building a stake in a company in an interesting market at a reasonable price.


Sales are through three divisions - Lighting, Signals and Components.  Lighting, provides energy efficient solutions for hazardous and non-hazardous industrial applications, through the use of high-brightness LEDs utilising a number of associated technologies.  Signals, supply high brightness LEDs for traffic, vehicle and obstruction signals.  Components, supply mainly to electronics OEMs for status indication and residual disconnect.  The share by divisional sales is detailed in the chart below:

Click to enlarge

 


 
North America is their largest market and they have manufacturing plants in North Carolina and in Mexico just 80 miles south of San Diego.  The territorial split of sales is shown in the chart below:

Click to enlarge





 
The company's expertise covers such areas as thermal management, optics and electronic circuitry and their intellectual property (IP) is protected by patents - during 2012 they had 115 patents pending, 36 filed and 8 granted.  Their skill is in packaging a complete product that includes thermal heat-sinks, power supplies, LEDs, optics and lenses; assembled in low cost manufacturing plants in Mexico and Malaysia.

The lighting markets they address are substantial in size with the hazardous and heavy industrial installed base, their target market, estimated to be worth in excess of $10bn.  Sub-sectors within this addressable market are detailed in the chart below:



Click on chart to enlarge





 


 
Dialight has healthy operating margins of 17% and a ROE of almost 23% a result of their strong and increasing IP and investments in low cost manufacturing.  Investment in both of these areas along with increased working capital requirements did reduce free cash flow in 2012 below the prior year; a not uncommon theme in the odd year for fast growing companies.


The shares are not cheap at 26 times last year's earnings and almost 21 times this year, but they come with the prospect of escalating growth in a large market and they have some interesting technology that may be of interest to the larger participants within the industry.

Interims are to be announced tomorrow, with the expectation that Lighting will show growth of more than 50%, but Signals to show a decline, resulting in lower profits as they have also invested in their sales channels and increased their production resources.  Depending on the comments within their outlook statement for the remainder of the year, the share price may fall back again producing an opportunity for potential long-term investors to achieve an entry at a reasonable value.

The CEO has a little over 1% of the company and, with his shares worth almost £4m, ensures that he has the necessary incentive and "owner's eye" to improve shareholder value over the long haul.  I would judge Dialight to have a good narrow economic moat, due to their intellectual property and low manufacturing cost base.  Certainly one to watch.    
 

Friday, 19 July 2013

Vodafone IMS

Vodafone Logo

Vodafone the second largest ( behind China Mobile) mobile telecoms company in the world. I have a holding in my income portfolio (epic code: VOD).



VOD issued their 1st quarter IMS today, announcing a decline in Group service revenue of 3.5%.  Europe is now declining in all markets, with the previously strong German market showing service revenue declining by 5.1% and the declines in Italy and Spain showing no deceleration.

On a positive note emerging markets continue to show good growth, with Turkey and India particularly strong at 15.5% and 13.8% respectively, also the associate investment in Verizon Wireless (VW) performed well as they saw service revenue growth of 7.2%.

Free cash flow (FCF) in the quarter was £1bn, a similar level to last year and the dividends received from VW added £2.1bn to this (this was a $3.2bn share of a $7bn dividend).

They state that VW's net debt stood at $9.8bn at 30 June, this is a $3.6bn increase from 31 March, but was after the payment of $7bn of dividends.  Which would imply that they generated $3.4bn of FCF in the quarter assuming no acquisitions or disposals.  At an annualised FCF generation of around say $12bn+, this reinforces VW's ability, if not inclination, to be able to pay a growing dividend to its two parents.  

They stated in their outlook that trading in the first quarter was consistent with their expectation for the 2014 financial year and therefore confirmed their outlook for the 2014 financial year.

I