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RNS Number : 0444V
Rolls-Royce Holdings plc
09 December 2021
09 December 2021
ROLLS-ROYCE HOLDINGS PLC TRADING UPATE
Rolls-Royce Holdings plc announced today its trading update to
30 November 2021.
-- Driving better results and order intake
- Benefit of cost reductions and market recovery reflected in
improving free cash flow
- Continued gradual recovery in large engine flying hours, a
significant award of the B-52 replacement engine contract in
Defence and demand recovering in Power Systems
-- Delivering on our commitments
- Restructuring programme delivering sustainable savings of more
than GBP1.0bn in FY 2021
- Net cash inflow achieved in the third quarter
- Free cash outflow in FY 2021 is expected to be better than
previous guidance of GBP2.0bn
- Disposals announced with proceeds totalling around
GBP2.0bn
-- Good progress on new markets
- Successful funding for Rolls-Royce SMR
- Significant achievements in Rolls-Royce Electrical
Chief Executive Warren East said: "We are delivering on the
elements within our control and are focused on our commitments. We
have achieved good results with our fundamental restructuring
programme, as we sustainably reduce costs and deliver a leaner and
more efficient company and are firmly on course to complete our
disposals programme. While external uncertainties clearly remain,
we have seen continued gradual recovery in our Civil Aerospace
business, a growing order book in Power Systems and have secured a
significant contract win in Defence. We are investing in the net
zero technologies and solutions that we need across the group to
grasp the tremendous commercial opportunity of the global energy
transition and drive long-term value. This all underpins our
strategy of creating a better quality and more balanced business
which can deliver significantly improved returns and cash flow into
the future."
Current trading and Full Year 2021 outlook
The gradual recovery in international flying combined with
market recovery in Power Systems and resilience in Defence are
driving improvements in our trading performance. In addition, our
restructuring programme, launched in May 2020, is delivering
sustainable cost savings more quickly than initially anticipated,
and positions us well for the GBP1.3bn savings target by the end of
2022. By the end of 2021 we expect to have removed more than 8,500
roles, with the pace of restructuring running ahead of our original
plan and footprint rationalisation continuing through the second
half of the year.
This improved trading performance drove a return to positive
free cash flow in the third quarter and reduced the outflow
expected in the second half. In addition, around GBP300m of
original equipment (OE) concession outflows, originally expected in
2021 are now expected to fall in 2022 due to delayed delivery of
aircraft for which we have already supplied engines. As a result of
both the improved trading and the concession timing, our free cash
outflow in 2021 is expected to be better than the GBP2bn previously
guided.
Performance summary
In Civil Aerospace, installed engine sales and aftermarket shop
visit activity are both lower than the prior year and at the lower
end of the guidance given at the half year. Large engine flying
hours have continued to recover gradually helped by the reopening
of certain key travel corridors, especially the trans-Atlantic
routes. The pace of travel recovery remains uneven as countries
around the world look to manage the ongoing challenges of the
COVID-19 pandemic. Our large engine flying hours are currently
around 50% of 2019 levels and approximately 46% year to date as
compared to the 43% average for the first half of the year. Engine
flying hours in business aviation remain above the 2019 level.
Current trading in Defence is in line with our expectations with
steady demand from our customers. In September, we were successful
in the B-52 replacement engine competition with an agreement to
power the US fleet of 76 eight-engine aircraft for the next 30
years, with a total value of $2.6bn. The initial phase of the
contract is for testing and development with a value of around
$500m.
In Power Systems, the recovery of customer demand in many of our
end markets is driving improvements in order intake. As a business
with a shorter cycle and higher inventory turnover than Civil
Aerospace and Defence, Power Systems has a greater exposure to the
current global supply chain disruption. The significant near-term
supply chain pressure looks set to continue for some time. Our
focused supply chain reporting and procurement practices are
helping to mitigate the impact in 2021 and we are closely
monitoring the business risk for 2022.
Rolls-Royce SMR has moved into its second phase with the
foundation of a special purpose vehicle with new investors raising
funds totalling GBP145m in exchange for approximately 20% of the
equity, in addition to a GBP50m commitment from Rolls-Royce, and
matched funding from the UK Government of up to GBP210m. These
funds support the UK Generic Design Assessment process for new
nuclear power plants and identification of factory sites for the
manufacture of the power plant modules.
In Rolls-Royce Electrical, we are very proud to claim that our
Spirit of Innovation is the world's fastest all-electric aircraft,
hitting a top speed of 345mph - well over 100mph faster than the
previous world speed record over a 3km distance. In addition to
this achievement being tremendously uplifting for our people, the
programme has provided valuable insights into the requirements of
aerospace battery systems for applications in new markets.
Strengthening our balance sheet with around GBP2bn of agreed
disposals
In line with our 2020 commitment to rebuild our balance sheet,
we have announced several disposals to generate approximately
GBP2bn in proceeds, including retained cash.
- Civil Nuclear Instrumentation & Control completed in
November (EUR99m proceeds received plus EUR37m retained cash)
- ITP Aero was announced in September with completion expected
in H1 2022 (expected proceeds of EUR1.7bn plus retained cash)
- Bergen Engines is expected to complete before the year end
(expected proceeds and retained cash of approximately EUR100m)
- AirTanker Holdings is expected to reach completion by Q1 2022
(expected proceeds of GBP186m)
The proceeds from these disposals, together with underlying free
cash flow generation from the Group will be used to reduce net
debt.
Our Full Year 2021 results will be announced on 24 February
2022.
Conference call details:
A Trading Update conference call for investors and analysts will
be held at 09:00 GMT today with Warren East, Chief Executive and
Panos Kakoullis, CFO.
UK dial-in: +44 333 300 0804
US dial-in: +1 631 913 1422
International dial-in: +44 333 300 0804
Participant passcode: 381 621 82#
A replay will also be made available on our website after the
event: www.rolls-royce.com/investors.
For further information, please contact:
Media
Richard Wray
Director of External Communications & Brand, Rolls-Royce
plc
Tel +44 (0) 7810 850055
Richard.Wray@Rolls-Royce.com
Investors
Isabel Green
Head of Investor Relations, Rolls-Royce plc
Tel +44 (0) 7880 160976
Isabel.Green@Rolls-Royce.com
www.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 GBP11.76 billion in 2020 and we
invested GBP1.25 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 LEI: 213800EC7997ZBLZJH69
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