9th Dec 2021 10:24
(Alliance News) - Rolls-Royce Holdings PLC said on Thursday it expects its 2021 cash outflow to be better than forecast following improved results in trading and positive results from its restructuring programme.
The London-based aerospace and defence company said free cash outflow in 2021 is now expected to be better than the GBP2 billion previously guided.
Rolls-Royce cited the gradual recovery in international flying combined with market recovery in power systems and resilience in defence for the improvement in its trading performance.
This overall improved trading performance, it said, has driven a return to positive free cash flow in the third quarter and reduced the outflow expected in the second half.
Rolls-Royce said large engine flying hours are currently around 50% of 2019 levels and approximately 46% of year-to-date as compared to the 43% average for the first half of the year. It added that engine flying hours in business aviation remain above the 2019 level.
The engine-maker said that trading in defence was in line with expectations thanks to "steady demand" from its customers and the award of a B-52 replacement engine contract to power 76 air-craft in the US fleet for the next 30 years. This contract was achieved back in September and had a total value of USD2.6 billion.
In power systems trading, Rolls-Royce said the recovery of customer demand in many of its end markets was driving improvements in order intake but added that its systems have had greater exposure to supply chain disruptions.
In addition, around GBP300 million of original equipment concession outflows, originally expected in 2021, are now expected to fall in 2022 due to delayed delivery of aircraft for which it has already supplied engines.
Rolls-Royce said that its restructuring programme, launched in May 2020, has delivered cost savings more quickly than initially anticipated. Rolls-Royce said it is now well positioned for the GBP1.3 billion savings target by the end of 2022.
GBP2 billion in disposals also aided in reducing Rolls-Royce's net debt.
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."
Rolls will announce its full-year results on February 24.
Shares in Rolls-Royce were down 4.2% at 123.28 pence on Thursday in London.
By Heather Rydings; [email protected]
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