TIDMRR.
RNS Number : 1918L
Rolls-Royce Holdings plc
12 May 2022
12 May 2022
ROLLS-ROYCE HOLDINGS PLC AGM STATEMENT AND TRADING UPDATE
Rolls-Royce Holdings plc is holding its Annual General Meeting
today and is hosting a site visit to its Civil Aerospace business
tomorrow. Alongside these events, Rolls-Royce has issued the
following trading update for the first four months of 2022 and also
medium term outlook for its Civil Aerospace business.
In his address to shareholders, Chief Executive Warren East will
comment:
"In 2021, we delivered improved financial performance and
continued to deliver on our commitments. As a result of the actions
we have taken, we have made significant progress on the path to
recovery from the impact of COVID-19 and are emerging as a better
balanced and more resilient business with a sustainable future,
focused on the long-term business opportunities presented by the
global energy transition. I would like to thank our colleagues for
their commitment and achievements this year and all our
stakeholders for their support and engagement.
It has been a privilege to lead Rolls-Royce and I am fully
committed to driving our business while we work towards a smooth
leadership transition this year. We are confident that we have
positioned the business to achieve positive profit and cash this
year, driven by the benefits of our cost reductions and increased
engine flying hours in Civil Aerospace together with a strong
performance in Defence and Power Systems, and balanced by our
commitment to invest in technology and systems that are critical to
the leading sustainable solutions we are delivering now and in the
future."
Trading update and outlook
Financial performance year-to-date has been in line with
expectation and our financial guidance for 2022 is unchanged. We
are well positioned for the anticipated growth in our end markets
and continue to expect positive momentum in our financial
performance in 2022 despite the ongoing risks around macroeconomic
uncertainties. We are working closely with our global supply chain
to limit the impact of disruption and will continue to adapt our
plans as the global situation evolves. Our long-term sourcing
agreements and hedging policies designed to limit volatility in raw
material inflation, give some near-term protection and we have
increased inventory levels to help mitigate the impact. We are
working with our suppliers to monitor and manage these risks and
challenges.
In Civil Aerospace, large engine long term service agreement
(LTSA) flying hours for the first four months of 2022 were 42%
higher than the prior year period. Passenger demand is recovering
on routes where travel restrictions have been lifted, such as in
Europe and the Americas, but additional COVID-19 restrictions have
resulted in fewer flights in China where the situation is still
evolving. Flying hours in Business Aviation have remained strong.
Shop visits and original equipment (OE) deliveries of installed and
spare engines are expected to accelerate during the course of the
year. We are continuing to capitalise on new opportunities. For
instance, Qantas recently committed to a deal for 12 Airbus
A350-1000s for its long-haul Project Sunrise initiative, powered by
our Trent XWB-97 engines. Rolls-Royce and Qantas have also
committed to sign a TotalCare (R) service agreement for the Trent
XWB-97 engines that will power the 12 aircraft.
In Defence, the products and services we provide are delivered
and maintained over decades of service to our large number of
customers and as such they are not immediately exposed to
individual geopolitical events. Our strong order backlog gives us
confidence on revenue, profit and cash conversion against the
headwinds of inflation and supply chain risk. As guided previously,
our operating margin is expected to be lower in 2022 compared with
2021, reflecting original equipment and aftermarket mix changes and
the planned increase in investment in Defence to support new
programme wins. Governments are increasing their long-term budget
allocations towards defence activities, underpinning the long-term
growth outlook we hold for Defence.
In Power Systems, the first four months of order intake has been
very strong across the entire business and particularly in both
power generation and defence end markets. We are working to limit
the impact of supply chain disruption, in part through holding
increased inventory, which as previously guided will impact cash
conversion this year. Interest in sustainable solutions is
increasing: the first engines for power generation, construction
and industrial applications have been approved for operation with
sustainable fuels and we are developing hydrogen engines.
Our New Markets businesses, Rolls-Royce Electrical and
Rolls-Royce SMR, continue to make good progress supported by
Rolls-Royce and third-party investment. We have commenced the
multi-year UK Generic Design Assessment process for our SMR design
and we are encouraged by the recent commitment to nuclear energy by
the UK Government. In Rolls-Royce Electrical, alongside the
aircraft manufacturer Tecnam and engine manufacturer Rotax, we have
completed the successful flight-testing of a hybrid-electric
demonstrator aircraft powered by a parallel-hybrid propulsion
system.
We are progressing well with our programme of disposals and are
confident in achieving the commitment to generate around GBP2bn in
total proceeds once the sale of ITP Aero completes, which is
expected to be in the first half of this year, subject to
regulatory approvals. The proceeds from the programme of disposals
will be used to repay debt.
Civil Aerospace medium term outlook and site visit
We are hosting a site visit at our Civil Aerospace facilities in
Derby tomorrow, 13 May. The event will include tours of our
facilities and a presentation with Q&A. We will set out our key
Civil Aerospace value drivers, highlight the operational side of
our business and provide a deeper understanding of how the changes
we have implemented are making it a better quality, more resilient,
and more agile business which is set up to increase returns and
deliver long-term sustainable growth.
The presentation will include our view of the medium-term
financial outlook for Civil Aerospace based on the actions we have
taken to improve cost efficiency and productivity, combined with
the current assumed recovery in demand, which is subject to risks
and uncertainties based on prevailing market and macroeconomic
conditions. In the medium term, we expect Civil Aerospace
underlying revenue to grow at a low double-digit percentage
compound average growth rate from 2021 with an operating margin
percentage in the high single digits, and with trading cashflow
comfortably exceeding operating profit.
Due to physical capacity constraints, the event is by invitation
only but there will also be a webcast starting at 10am UK time on
13 May and lasting for approximately two hours. The webcast details
and presentation materials will be shared on our website
www.rolls-royce.com/investors and a replay will be made available
after the event.
Our next scheduled trading update will be on 4 August 2022, when
we will publish our Half Year 2022 results.
This announcement has been determined to contain inside
information.
For further information, please contact:
Investors
Isabel Green
Head of Investor Relations, Rolls-Royce plc
Tel +44 (0) 7880 160976
Isabel.Green@Rolls-Royce.com
www.Rolls-Royce.com
Media
Richard Wray
Director of External Communications & Brand, Rolls-Royce
plc
Tel +44 (0) 7810 850055
Richard.Wray@Rolls-Royce.com
About Rolls-Royce Holdings plc
1. Rolls-Royce pioneers the power that matters to connect, power
and protect society. We have pledged to achieve net zero greenhouse
gas emissions in our operations by 2030 (excluding product testing)
and joined the UN Race to Zero campaign in 2020, affirming our
ambition to play a fundamental role in enabling the sectors in
which we operate achieve net zero carbon by 2050.
2. Rolls-Royce has customers in more than 150 countries,
comprising more than 400 airlines and leasing customers, 160 armed
forces and navies, and more than 5,000 power and nuclear
customers.
3. Annual underlying revenue was GBP10.95 billion in 2021,
underlying operating profit was GBP414m and we invested GBP1.18
billion on research and development. We also support a global
network of 28 University Technology Centres, which position
Rolls-Royce engineers at the forefront of scientific research.
4. Rolls-Royce Holdings plc is publicly traded company (LSE:
RR., ADR: RYCEY, LEI: 213800EC7997ZBLZJH69)
Note on forward-looking statements
This press release may contain projections and forward-looking
statements. The words "believe", "expect", "anticipate", "intend"
and "plan" and similar expressions identify forward-looking
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factors which may cause the Company's actual results, performance
or achievements to be materially different from any future results,
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END
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