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Rolls-Royce boss to announce turnaround plan is working Rolls-Royce boss to announce turnaround plan is working
(35 minutes later)
The Rolls-Royce boss Warren East is due to tell investors that trading in the first months of the year has met expectations and that the embattled engine maker’s turnaround plan is on track.The Rolls-Royce boss Warren East is due to tell investors that trading in the first months of the year has met expectations and that the embattled engine maker’s turnaround plan is on track.
Before its annual meeting in Nottingham on Thursday, the British company, which makes engines for aircraft and ships, stuck to its full-year outlook after issuing five profit warnings in less than two years.Before its annual meeting in Nottingham on Thursday, the British company, which makes engines for aircraft and ships, stuck to its full-year outlook after issuing five profit warnings in less than two years.
The first six months of this year are expected to be “close to break-even”. Rolls expects business – and profits – to pick up in the second half due to increased large engine deliveries and benefits from its restructuring programmes. The first six months of this year are expected to be “close to break-even”. Rolls-Royce expects business to pick up in the second half due to increased large engine deliveries, good revenue growth in servicing engines and benefits from its restructuring programmes. Last year, it made two-thirds of its profits in the second half and this year profits will be weighted even more heavily towards that period.
Analysts expect 2016 pre-tax profits to halve to £642m, according to a Thomson Reuters poll. Analysts expect 2016 pre-tax profits to halve from last year to £671m, according to the company (pdf).
The company has been hit by falling demand for corporate jets in emerging markets, cuts to defence budgets and plunging oil prices that have prompted energy companies to scale back investment plans. Rolls-Royce has been hit by falling demand for corporate jets in emerging markets, cuts to defence budgets and plunging oil prices that have prompted energy companies to scale back investment plans.
Reiterating comments he made in February, East said: “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.”Reiterating comments he made in February, East said: “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.”
Rolls-Royce, which manufactures engines for Boeing’s 787 Dreamliners and Airbus’s A380 superjumbos, said it was “well on track” to deliver the expected cost savings of £30-£50m this year. The restructuring programmes in civil aerospace, defence aerospace and its ship business are also on track, including plans to revamp its factory in Indianapolis in the US in the second half of the year. Rolls-Royce, which manufactures engines for Boeing’s 787 Dreamliners and Airbus’s A380 superjumbos, said it was “well on track” to deliver the expected cost savings of £30-£50m this year. The restructuring programmes in civil aerospace, defence aerospace and its marine division are also on track, including plans to revamp its factory in Indianapolis in the US in the second half of the year.
The Jefferies analyst Sandy Morris said: “In the last two months, things had gone quiet around Rolls-Royce. We do not see why today’s update should disturb the peace.”
The group recently announced plans to hire 350 people at its factory in Derby to assemble its Trent XWB engine – welcome news after a big wave of job cuts totalling 2,600 in November 2014 that mostly affected Derby and Bristol.The group recently announced plans to hire 350 people at its factory in Derby to assemble its Trent XWB engine – welcome news after a big wave of job cuts totalling 2,600 in November 2014 that mostly affected Derby and Bristol.
The US activist investor ValueAct has built a near 11% stake in Rolls-Royce, becoming its biggest shareholder, and was recently given a seat on the board. Bradley Singer, the San Francisco-based firm’s chief operating officer, joined as a non-executive director and also became a member of Rolls-Royce’s science and technology committee. The US activist investor ValueAct has built a near 11% stake in Rolls-Royce, becoming its biggest shareholder, and has been given a seat on the board. Bradley Singer, the San Francisco-based firm’s chief operating officer, joined as a non-executive director last month and also became a member of Rolls-Royce’s science and technology committee.