TIDMRR.
RNS Number : 1910M
Rolls-Royce Holdings plc
07 May 2020
07 May 2020
ROLLS-ROYCE HOLDINGS PLC AGM STATEMENT
We are today holding our Annual General Meeting. In his update
to shareholders, Chief Executive Warren East will comment: "In this
unprecedented period of uncertainty we have rapidly adapted our
business to safeguard its future for all of our stakeholders. We
have implemented heightened safety procedures to protect our people
and we are providing practical assistance to combat the impact of
COVID-19 on the countries in which we operate. In the UK, for
instance, we have put our manufacturing and supply chain expertise
to use in the drive to increase the supply of ventilators for
hospitals. We have also strengthened the financial resilience of
the Group to ensure we are well positioned to weather the pandemic.
We are working hard to mitigate the near-term disruption caused by
COVID-19 and are making stronger than expected progress on our
mitigating actions, giving us confidence that we can now deliver up
to GBP1.0 billion of savings this year. However, we must also take
the difficult but necessary decisions to ensure the Group emerges
from this period with the appropriate cost base for what will be a
smaller commercial aerospace market which may take several years to
recover. I am proud of the dedication and commitment of my
colleagues and thankful for the continuing s upport of our s
hareholders and other stakeholders during this challenging
time."
Safeguarding our people, business and communities
Our top priority remains safeguarding the lives and livelihoods
of our people. Proactive measures remain in place at our facilities
to help keep our people safe and minimise operational disruption,
including remote working and modified shifts in our manufacturing
facilities, which enable us to continue to serve our customers in
these difficult times.
We are supporting our communities with whatever practical help
we can offer. In the UK, we are proud to be a member of a
consortium producing additional ventilators for hospitals. Across
Rolls-Royce, teams are using their manufacturing skills in areas
such as 3D printing to produce personal protective equipment (PPE),
including over 10,000 face shields, to help protect local
healthcare staff. Our R(2) Data Labs team, meanwhile, has assembled
a group of leading companies to collaborate on the Emergent
Alliance. This collection of data analytics experts will combine
traditional economic data sets with behaviour and sentiment data,
to provide insights that will support government decision making
through the pandemic.
Update on market conditions and mitigating actions
COVID-19 has caused significant disruption to the global
aerospace industry, with an unprecedented reduction in air traffic.
In order to mitigate the impact on our 2020 financial performance
we immediately implemented a number of actions, as announced on
April 6, which were initially expected to deliver a cash flow
benefit of at least GBP750 million in 2020. We have made better
than anticipated progress with these actions, and we now expect to
deliver up to GBP1.0 billion of cash savings in 2020. The
cancellation of the final 2019 shareholder payment has also
conserved an incremental GBP137 million of cash flow. An additional
revolving credit facility of GBP1.5 billion was secured to bolster
the Group's liquidity position and a successful syndication process
with a larger group of banks has increased this to GBP1.9
billion.
Looking ahead, the severity of the disruption caused by COVID-19
is expected to lead to a smaller commercial aerospace market which
may take several years to recover. As a result, we are actively
pursuing changes to our business, particularly in Civil Aerospace,
to better align to medium-term market conditions. We are committed
to working with our trade union and employee representatives, as
well as our customers and suppliers, as we adjust to the new
outlook and establish a more appropriate cost base in order to
secure our future for all stakeholders. We have promised to give
our people further details of the impact of the current situation
on the size of our workforce before the end of this month and will
consult with affected employees in due course.
Civil Aerospace widebody engine flying hours were approximately
40% lower than our prior expectations for the first four months of
the year. This reflected a fall of 90% in April as airlines around
the world have temporarily grounded large proportions of their
fleets. As a result of this lower level of activity we are now
enacting a significant reduction in the volume of service visits in
our maintenance, repair and overhaul (MRO) shops for 2020 versus
our original plans and consequently now expect MRO volumes in 2020
to be below 2019 levels. Additionally, our airframe customers have
reduced aircraft production rates and as a result we currently
expect to deliver around 250 widebody engines in 2020, down from
our previous guidance of 450.
We have taken a number of immediate actions to adapt to the
current market conditions. These include working with our
supply-chain to reduce direct procurement as well as placing over
4,000 of our own employees in the UK on furlough. These actions are
not expected to impact the recovery of the Trent 1000, where we
remain focused on returning the fleet to full health. We now have
enough overhauled and spare engines to reduce aircraft on ground
(AOG) to around ten once air traffic resumes, well on the way
towards our target to reduce AOG to single-digits by the end of the
second quarter.
The diversity of our business units makes us more resilient,
with almost half of our sales coming from non-Civil Aerospace end
markets. Year to date, our Defence business has been robust,
although the impact of social distancing and self-isolation on our
operations and those of our suppliers represents a potential risk
to activity levels. We are closely monitoring our supply chain and
taking actions, where possible, to mitigate the impact on our
productivity.
Power Systems, however, has experienced weaker trading since the
first quarter due to extended shutdowns in local markets and
ongoing travel bans the effects of which have only been partly
mitigated by our diverse end market exposure and cost savings. As a
result, while we expect a meaningful positive contribution to full
year profit and cash flow from Power Systems, its performance in
2020 is likely to show a material deterioration compared to the
prior year. The pandemic has particularly impacted our industrial
end markets, most notably oil & gas and mining, as well as
causing lower services activity and the temporary closure of
several yacht production facilities. In PowerGen, delays to
construction projects are currently impacting sales of backup power
solutions, however looking ahead we continue to anticipate the
higher data traffic resulting from COVID-19 to drive greater demand
for mission-critical backup power for data centres.
As a Group, we are prepared to endure a prolonged period of
uncertainty. Due to the unprecedented reduction in air traffic
caused by COVID-19, we are anticipating a significant net cash
outflow during the second quarter and it remains too early to guide
on the likely outcome for the full year. Meanwhile, our financial
position remains robust and our strong liquidity position provides
support for our operations. Our strategic choices over the last few
years, including streamlining our portfolio, investing in our
management systems, and building a culture of agility - have helped
us to respond quickly to COVID-19 with actions to mitigate the
immediate impact. Once the recovery begins, the shape of our
portfolio and the synergies between our divisions will leave us
well placed to capitalise on the long-term potential of our
markets, and to fulfil our vital role in the world's transition to
a low-carbon power future.
Change to scheduled reporting dates
We will provide the market with a post-close update on our first
half trading at the start of July. In light of the uncertainty
caused by COVID-19 and in order to provide greater clarity on
future guidance, our First Half results will now be announced
towards the end of August.
About Rolls-Royce Holdings plc
1. Rolls-Royce pioneers cutting-edge technologies that deliver
clean, safe and competitive solutions to meet our planet's vital
power needs.
2. Rolls-Royce has customers in more than 150 countries,
comprising more than 400 airlines and leasing customers, 160 armed
forces, 70 navies, and more than 5,000 power and nuclear
customers.
3. Annual underlying revenue was GBP15.3 billion in 2019, around
half of which came from the provision of aftermarket services.
4. In 2019, Rolls-Royce invested GBP1.45 billion on research and
development. We also support a global network of 29 University
Technology Centres, which position Rolls-Royce engineers at the
forefront of scientific research.
5. The Group has a strong commitment to apprentice and graduate
recruitment and to further developing employee skills.
6. Rolls-Royce Holdings plc LEI: 213800EC7997ZBLZJH69
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
Peter Lapthorn
Investor Relations Manager
Rolls-Royce plc
Tel. +44 (0) 7717 811 069
Peter.Lapthorn@Rolls-Royce.com
www.Rolls-Royce.com
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 presentation, 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 document speak
only as at the date of this presentation 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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END
AGMSSLFAMESSESI
(END) Dow Jones Newswires
May 07, 2020 02:00 ET (06:00 GMT)
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