Rolls-Royce on track to achieve £200m savings

Rolls-Royce is holding its AGM in Derby today (May 4) with chief executive Warren East expected to tell shareholders that the first few months trading of the new financial year is in line with expectations.

East will also tell the AGM that expectations for the full year are unchanged.

East said: “At this early stage in the year we see no reason to change our expectations for profit and importantly cash flow for the year as a whole. We have some important transformation initiatives underway and, while we have made good progress in our cost cutting and efficiency programmes, more needs to be done to ensure we drive sustainable margin improvements within the business.”

Rolls-Royce says that, as in 2016, profit before financing charges and tax is expected to be weighted towards the second half of the year, with the proportion of profit generated in the first six months of the year expected to be similar to that achieved in 2016.

Ffree cash flow is again expected to be significantly weighted towards the second half with first half cash flow forecast to be lower than in 2016, largely reflecting the higher volumes of large engines sold at a loss and a number of other one-off cash items.

East added: “The 2017 outlook also excludes the year-on-year effect of foreign exchange translation on our reported results. Our guidance at this stage of the year is unchanged from that provided in February. If rates remain unchanged from those seen recently, the impact of the average year-on-year movement on the translation of our overseas subsidiaries results would improve reported revenues by around £400m and improve reported profit before tax by around £50m.

East said the priorities for 2017 are fourfold: to strengthen the firm’s focus on engineering, operational and aftermarket excellence; to sustain its strong start to its transformation programme; to continue to rebuild trust and confidence in its long-term growth prospects; and, deliver an update on the company’s long-term goals.

He added: “In the first few months of the year we have sustained progress to deliver these priorities, including driving further benefits from our transformation programme. As a result, we remain on track to deliver the expected year-on-year incremental cost savings in 2017 of between £80-110m and achieve our target of £200m per annum by the end of 2017.”