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Rolls-Royce is making “good progress” and “moving at pace” with its transformation program to make the UK engine more competitive and profitable. “Our increased focus on efficiency and simplification is helping to keep costs down and has already identified savings,” Rolls-Royce said in a trading update on May 11 that coincided with its Annual General Meeting. Rolls-Royce making good progress on transformation.
Under new CEO Tufan Erginbilgic, Rolls-Royce has identified various areas on which it wants to focus as the company transforms into a high-quality and competitive business with a strong balance sheet and growing profit, cash flows, and returns.
Part of the transformation is various board and leadership changes that include a new Chief Financial Officer, with Helen McCabe taking over from Panos Kakoullis from September 1. Rob Watson was appointed the new President of Civil Aerospace as of March 31, taking over from Chris Cholerton who was appointed Group President.
In the trading update, Rolls-Royce said today that the financial performance is improving, “reflecting positive changes driven by our transformation program workstreams and good end market demand for our products and services.” The guidance for 2023 is unchanged from what was announced in February during the 2022 results presentation. Rolls-Royce expects an underlying operating profit of £0.8 to£1.0 billion and free cash flow of £0.6 to £0.8 billion. “We anticipate our free cash flow generation will be seasonally weighted in the second half of the year, as previously indicated.”
The supply chain continues to be a concern: “Supply chain management remains a key operational challenge for us as original equipment and aftermarket services volumes increase, especially in Civil Aerospace.”
Engine Flying Hours continue to increase
Engine Flying Hours (EFH) of large commercial engines is back at 83 percent of 2019 levels on April 30, thanks to the continued recovery of long-haul travel on which Rolls-Royce’s Trent engines operate. Long-term service agreement large engine flying hours are on track for the eighty to ninety percent range for the full year. As flying hours increase, shop visit volumes also go up. Engine deliveries to Boeing and Airbus are also on track with expectations.
Rolls-Royce secured its biggest-ever order of Trent XWB-97 engines in the period, with a Memorandum of Understanding from Air India for 68 engines plus 20 options for the Airbus A350. Lufthansa also placed new orders for Trent engines for its Boeing 787s and A350s.
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