Rolls-Royce Holdings PLC (LSE:RR.) said it continues to trade in line with expectations so far this year, adding that its guidance for 2022 remains unchanged.
In a trading statement ahead of its AGM today, the FTSE 100 engine maker also provided an outlook for the medium term for its Civil Aerospace business, forecasting growth in underlying revenue at a low double-digit percentage from 2021.
The Civil Aerospace operating margin is expected to grow in the high single digits, with trading cashflow comfortably exceeding operating profit.
Rolls said the group is “well positioned” for the anticipated growth in its end markets and anticipates a “positive momentum” in its financial performance this year, despite the ongoing risks around macroeconomic uncertainties.
“As a result of the actions we have taken, we have made significant progress on the path to recovery from the impact of COVID-19 and are emerging as a better balanced and more resilient business with a sustainable future, focused on the long-term business opportunities presented by the global energy transition,” said chief executive Warren East.
“We are confident that we have positioned the business to achieve positive profit and cash this year, driven by the benefits of our cost reductions and increased engine flying hours in Civil Aerospace together with a strong performance in Defence and Power Systems, and balanced by our commitment to invest in technology and systems that are critical to the leading sustainable solutions we are delivering now and in the future."
In Civil Aerospace, large engine long-term service agreement (LTSA) flying hours rose 42% in the first four months of 2022 compared with the prior year period.
Rolls noted that the easing of travel restrictions has driven a recovery in passenger demand in Europe and the Americas, but additional COVID-19 restrictions have led to a decline in the number of flights in China.
A strong order backlog in the Defence business “gives us confidence on revenue, profit and cash conversion against the headwinds of inflation and supply chain risk”, the company said.
It repeated its previous forecast that the Defence operating margin is set to be lower in 2022 compared with 2021, reflecting original equipment and aftermarket mix changes and the planned increase in investment in Defence to support new programme wins.
The company said its long-term growth outlook for Defence is supported by governments around the world increasing their long-term spending on defence.
Meanwhile, the Power Systems operations saw strong order intake in the first four months of 2022. The company is trying to mitigate against the impact of supply chain disruption by holding increased inventory, which will impact cash conversion this year, as previously announced.
Commeting on its disposals programme, Rolls said it expects to meet its commitment to generate £2bn in total proceeds once the sale of ITP Aero completes, which is set to occur in the first half of this year. The company will use the proceeds from disposals to repay debt.