Thursday, 5 May 2016

Rolls-Royce Holdings plc is today holding its Annual General Meeting in Nottingham. In his comments to shareholders, Chief Executive Warren East will be confirming that overall trading in the first few months of the year has been in line with expectations and that the outlook for the year as a whole is unchanged. Reconfirming his comments in February, Warren East added: 'Despite steady market conditions for most of our businesses, 2016 continues to be a challenging year overall as we sustain investment and start to transition major products in Civil Aerospace, and tackle weak markets in Marine.'

Reflecting the previously identified headwinds expected in 2016, and the resulting lower level of overall performance compared to the prior year, profit before financing charges and tax will be significantly weighted towards the second half, with the first six months of the year expected to be close to breakeven. Looking to the balance of the year, the second half outlook reflects increased large engine deliveries, good underlying growth in aftermarket revenues and expected incremental benefits from our ongoing restructuring programmes.

Free cash flow is also expected to be significantly more weighted towards the second half than in 2015. This largely reflects the lower level of first half profit compared to the previous year and the strong cash flow performance at the end of 2015, some of which reversed in the first month of 2016.

The 2016 outlook also excludes the year-on-year effect of foreign exchange translation. At this stage of the year, if rates remain at the average levels seen so far in 2016, the movement would improve reported revenues by around £450m and improve reported profit before tax by around £50m.

As set out in February at our Full Year results, the priorities for 2016 are threefold: to strengthen our focus on engineering and operational excellence and leverage our installed base; to deliver a strong start to our transformation programme; and to start rebuilding trust and confidence in our long-term growth prospects. Good progress has been made on a number of initiatives to deliver these priorities, including the early stages of our transformation programme. As a result, we are well on track to delivering the expected cost savings in 2016 of between £30-50m. In addition, the legacy restructuring programmes within Civil Aerospace, Defence Aerospace and Marine are also on track, including the major new investment to transform the Defence Aerospace manufacturing facility in Indianapolis, started in the second half of 2015.

A more detailed update on progress towards our 2016 objectives will be given with our Half Year results in July 2016.

This announcement contains forward-looking statements. Any statements that express forecasts, expectations and projections are not guarantees of future performance and will not be updated. By their nature, these statements involve risk and uncertainty, and a number of factors could cause material differences to the actual results or developments. This announcement is intended to provide information to shareholders, is not designed to be relied upon by any other party, or for any other purpose and the Company and its directors accept no liability to any other person other than under English law.

About Rolls-RoyceHoldings plc

  1. Rolls-Royce's vision is to be the market-leader in high performance power systems where our engineering expertise, global reach and deep industry knowledge deliver outstanding customer relationships and solutions. We operate across five businesses: Civil Aerospace, Defence Aerospace, Marine, Nuclear and Power Systems.
  2. Rolls-Royce has customers in more than 120 countries, comprising more than 400 airlines and leasing customers, 160 armed forces, 4,000 marine customers including 70 navies, and more than 5,000 power and nuclear customers.
  3. We have three common themes across all our businesses:
    • Investing in and developing engineering excellence
    • Driving a manufacturing and supply chain transformation which will embed operational excellence in lean, lower-cost facilities and processes
    • Leveraging our installed base, product knowledge and engineering capabilities to provide customers with outstanding service through which we can capture aftermarket value long into the future.
  5. Annual underlying revenue was £13.4 billion in 2015, around half of which came from the provision of aftermarket services. The firm and announced order book stood at £76.4 billion at the end of 2015.
  6. In 2015, Rolls-Royce invested £1.2 billion on research and development. We also support a global network of 31 University Technology Centres, which position Rolls-Royceengineers at the forefront of scientific research.
  7. Rolls-Royce employs over 50,000 people in more than 46 countries. Nearly 15,700 of these are engineers.
  8. The Group has a strong commitment to apprentice and graduate recruitment and to further developing employee skills. In 2015 we employed 228 graduates and 277 apprentices through our worldwide training programmes.

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Rolls-Royce Holdings plc published this content on 05 May 2016 and is solely responsible for the information contained herein.
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