Royal Dutch Shell half year

Royal Dutch Shell a global group of energy and petrochemical companies. I have a holding in my income portfolio (epic code: RDSB)

Royal Dutch Shell announced their half year results last Thursday.  Revenue for the second quarter was $111.2bn down -1.3% and for the six months at $220.9bn fell -2%.

 

Second quarter 2014 earnings, on a CCS basis, were $5.1bn compared with $2.4bn last year and excluding identified items, mainly for impairments, were $6.1bn compared with $4.6bn last year.

 

EPS on a CCS basis excluding identified items was $0.97, 32.9% above last year and for the six months period was $2.13 up 10.9%.  On a reported basis for the six months EPS was $1.56 a reduction of -0.6%.

 

A second quarter dividend of $0.47 has been declared, an increase of 4.4%.

 

Identified items of $1bn in the quarter included impairments of just over $2bn mainly for their dry gas properties in the US, offset by profits from divestments.  This follows on from $2.9bn of impairments in the first quarter mainly against refineries in Europe and Asia.

 

Free cash flow for the six months was $0.25bn less than last year at $6.7bn, but divestments netted $7.6bn and so with an outlay for dividends and buy-backs of $5.1bn and investments in JVs of $1.4bn, net debt was reduced to $28.7bn a gearing of 15.5%.

 

A reasonable performance from Shell, once the almost $5bn of impairments are excluded.  Shame that due to the strength of sterling the dividend increase will likely be a reduction, once the sterling equivalent is announced.

 

Although the rationale for share buy-backs historically was to off-set dilution of the scrip dividend programme that is now cancelled, management still expects to buy-back $5.4-6.4bn of shares over the next 18 months and, at a P/BV of less than 1.5, it probably makes economic sense.