Rolls-Royce Holdings plc 2016 Half-Year Results
28-Jul-2016 Commenting on the results, Warren East, Chief Executive, said: "In the first half of 2016 Rolls-Royce performed broadly in line with expectations, delivering a result a little better than breakeven; and the outlook for the rest of the year remains unchanged. Order intake has been good and, although known headwinds constrained revenue and profit in the first half, the business remains well positioned to deliver a solid second half performance supported by growth in engine deliveries, stronger aftermarket revenues and incremental benefits from our ongoing restructuring programmes."
| Reported | Underlying | |||||
| Half year to 30 June | 2016 | 2015 | Change* | 2016 | 2015 | Change* |
| Revenue (£m) | 6,462 | 6,370 | -1% | 6,143 | 6,256 | - 5% |
| Profit before tax (£m) | (2,150) | 310 | - | 104 | 439 | - 80% |
| Earnings per share (p) | (96.72)p | 19.51p | - | 4.20p | 18.30p | -81% |
| 2016 | 2015 | Change** | ||||
| Net funds (£m) | (712) | (643) | -69 | |||
| Free cash flow (£m)*** | (399) | (576) | +177 |
Underlying: for definition see note 2 on page 32; * translated at constant exchange rates; ** translated at actual exchange rates; *** free cash flow defined as operating cash after capital expenditure, pensions and taxes, before payments to shareholders, foreign exchange and acquisitions & disposals. The derivation of free cash flow from the cash flow statement is shown on page 44.
H1 highlights
Reported revenue down 1% at constant exchange rates; reported loss reflects a non-cash impact of £2.2bn period-end mark-to-market revaluation of our derivatives
Underlying revenue down 5% at constant exchange rates, led by Civil Aerospace and Marine
Underlying profit before tax at £104m, down 80% at constant exchange rates
As set out in February 2016, interim payment to shareholders reduced to 4.60 pence per share (2015 interim: 9.27 pence)
Transformation programme
2016 programme well underway, good progress on actions to date
£50m benefit expected in 2016
Over £100m of annualised savings already identified; on track for £150-200m by end 2017
Looking forward
Trading outlook for 2016 unchanged
€720m acquisition of outstanding ITP stake announced 11 July; expected completion early 2017
Greater clarity on principles of IFRS 15; further work required in order to assess likely impacts
Warren East added: "We have taken some positive first steps on the journey that will lead Rolls-Royce to profitable and highly cash generative growth. Our strategic advantages lie in our focus on engineering excellence, operational excellence and capturing value in the aftermarket. In the first six months, we have made progress with our business transformation; introducing the greater pace and simplicity required to make Rolls-Royce a more resilient company."
2016 Half Year Business Highlights
Percentage or absolute change figures in this document are on a constant translational currency ('constant currency') basis unless otherwise stated
| % of Group
revenues* |
Closing order
book |
Underlying revenue | Underlying profit before financing | |||
| £bn | £m | £m | ||||
| H1 2016 | % change | H1 2016 | % change | |||
| Civil Aerospace | 51% | 70.5 | 3,171 | -5% | 31 | -91% |
| Defence Aerospace | 16% | 4.2 | 1,002 | -1% | 128 | -33% |
| Power Systems | 18% | 2.0 | 1,084 | -3% | 13 | -35% |
| Marine | 9% | 1.0 | 548 | -25% | (13) | n/a |
| Nuclear | 6% | 2.0 | 356 | +14% | 18 | -15% |
| Eliminations/other/central | (0.2) | (18) | (19) | |||
| Total Group | 79.5 | 6,143 | -5% | 158 | -70% | |
* Based on gross revenues prior to intra-group eliminations
Civil Aerospace
Underlying revenue down 5% and lower gross margins, principally due to:Original equipment (OE): increased deliveries of newer Trent engines but lower link-accounted Trent 700 and business aviation sales
Services: growth from in-production fleet, but declining regional and other large engine fleet aftermarket revenues; increase in technical costs for large engines, including the Trent 1000 but some offsetting foreign exchange benefits
£3.4bn order book growth; includes over £2bn foreign exchange benefit from long-term US dollar planning rate change
Good progress on new engine programmes: launch of the Trent XWB-84 EP with Singapore Airlines in February and Trent 1000 TEN receiving EASA certification in early July
Supply chain modernisation reducing costs and increasing capacity for Trent XWB ramp up
H2 outlook: increasing deliveries driving OE growth and further targeted lifecycle cost savings on large engine installed base
Defence Aerospace
Underlying revenue 1% lower; growth in OE revenues offset by reduction in service revenues
Underlying profit before financing down 33%; reflecting adverse product mix and £31m costs supporting TP400 programme
Roll-out of further Service Delivery Centres set to enhance aftermarket service offering
H2 outlook: supported by higher engine deliveries, particularly in transport & patrol; actions underway to mitigate TP400 costs
Power Systems
Underlying revenue 3% lower; led by weaker OE sales
Underlying profit before financing 35% lower; reflecting lower volume and changes in mix
R&D investment focus on higher volume engine applications
H2 outlook: challenging market environment; healthy closing order book for OE in a number of key market segments; cautious but positive outlook
Marine
Underlying revenue down 25%; weak offshore markets impacting OE and service revenues
Underlying profit before financing negative; lower volumes and reduced overhead absorption from weak offshore performance with some offset from non-repeat of contract provision in 2015
Net restructuring benefits from legacy programmes starting to benefit performance
H2 outlook: continuing challenging offshore market for OE and services; naval and merchant focus on operational execution and ongoing cost reduction
Nuclear
Underlying revenue 14% higher; strong revenues led by increased submarine work
Underlying profit before financing 15% lower, adverse margin mix in submarine projects
H2 outlook: steady - focus on improving delivery performance
This announcement has been determined to contain inside information.
Download Files
There are files associated with this article. You can download them below.
You need to be logged in to download files.