# Rolls-Royce transforming into a high quality and competitive business

- Link: https://www.directorstalkinterviews.com/rolls-royce-transforming-into-a-high-quality-and-competitive-business/4121118423
- Published: 2023-05-11T08:16:42+01:00
- Author: Amilia Stone

**Rolls-Royce Holdings plc** (LON:RR) is holding its Annual General Meeting today.
In his address to shareholders, Chief Executive Tufan Erginbilgic will comment:

> _“We are transforming Rolls-Royce into a high quality and competitive business
> with a strong balance sheet and growing profit, cash flows and returns. We are
> already benefitting from the actions we are taking as well as recovery and growth
> in our end markets. We announced several changes to the executive team in March
> to support the transformation, adding leaders with proven track records of delivery
> and high-performance. We are making good progress and our financial performance
> year-to-date is in line with expectations. I’d like to thank everyone at Rolls-
> Royce for their hard work and commitment so far. I am confident that, together,
> we can achieve great results.”_

**Trading update to 30 April 2023**

Our financial performance is improving reflecting positive changes driven by our
transformation programme workstreams and good end market demand for our products
and services. Supply chain management remains a key operational challenge for us
as original equipment and aftermarket services volumes increase, especially in Civil
Aerospace. Our financial performance is in line with our expectations at the time
of the full year results on 23 February. Our underlying operating profit guidance
of £0.8-£1.0bn and free cash flow guidance of £0.6-£0.8bn in 2023 is unchanged. 
We anticipate our free cash flow generation will be seasonally weighted in the second
half of the year, as previously indicated.

In Civil Aerospace, long term service agreement large engine flying hours (EFH) 
were 83% of 2019 levels in the four months to 30 April, and on track for the 80%
to 90% range for the full year, as guided in February. Shop visit volumes and OE
deliveries are also on track with expectations. We have continued to win new business
including our biggest ever order of Trent XWB-97 engines in the period, with an 
MoU for 68 engines (plus 20 options) for Air India.

In Defence, we continued our successful run of key programme awards with the announcement
that the AUKUS submarine programme will be powered by Rolls-Royce nuclear reactors.
In the US, Bell’s V-280 Valor, powered by our AE1107F engines, cleared the protest
period, enabling our teams to progress to the next phase, with the first aircraft
due to enter into service in 2030. Bell’s V-280 Valor was selected last year by 
the US Army’s Future Long Range Assault Aircraft programme to replace its Black 
Hawk helicopters.

In Power Systems, revenue growth is being driven by demand for aftermarket services
and exceptionally high order intake in the prior year, especially for power generation
solutions. We are getting improved pricing on new orders which will drive margins
up with the benefits expected to start showing in the second half of the year. High
order intake year-to-date included strong demand from marine customers, including
an order for Series 4000 gensets for the U.S Navy’s Constellation Class frigate 
programme.

Work on the transformation programme is moving at pace. Our increased focus on efficiency
and simplification is helping to keep costs down and has already identified savings,
for example the closure of our R^(2) Factory venture. We are encouraged by the early
progress of our commercial optimisation and working capital workstreams, with positive
results expected to build as the year goes on. Our strategic review is on track 
and as previously indicated, we will communicate the findings and medium term targets
in the second half of 2023.

Rolls-Royce’s Half Year 2023 results will be announced on 3 August 2023.

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