REG - Rolls-Royce Holdings - AGM Statement and Trading Update

Rolls-Royce HoldingsAnnouncement

12/05/2022 07:00

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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® 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 £2bn 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
(http://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 (http://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 £10.95 billion in 2021,
underlying operating profit was £414m and we invested £1.18 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 statements. All statements other than
statements of historical facts included in this press release, including,
without limitation, those regarding the Company's financial position,
potential business strategy, potential plans and potential objectives, are
forward-looking statements. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the Company's
actual results, performance or achievements to be materially different from
any future results, performance or achievements expressed or implied by such
forward-looking statements. Such forward-looking statements are based on
numerous assumptions regarding the Company's present and future business
strategies and the environment in which the Company will operate in the
future. Further, certain forward-looking statements are based upon assumptions
of future events which may not prove to be accurate. The forward-looking
statements in this press release speak only as at the date of this press
release and the Company assumes no obligation to update or provide any
additional information in relation to such forward-looking statements.

 

The merits or suitability of investing in any securities previously issued or
issued in future by the Company for any investor's particular situation should
be independently determined by such investor. Any such determination should
involve, inter alia, an assessment of the legal, tax, accounting, regulatory,
financial, credit and other related aspects of the transaction in question.

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