Rolls-Royce Group plc is today holding its 2009 Annual General Meeting at the Queen Elizabeth II Centre in London.
Sir John Rose, Chief Executive, made a presentation to shareholders which reflected the content of the following Interim Management Statement:
“The Group is well placed to manage the current challenges and emerge stronger and better positioned.
“The application of a consistent strategy has resulted in a broad and well balanced portfolio in terms of geographical spread, the balance between our businesses and the proportion of revenue generated by services. The combination of the high technological content of our products and services, our ability to integrate technologies into complex power systems and our understanding of our customers’ requirements have created significant barriers to entry and new opportunities for long-term growth. The Group’s growing installed base of products underpins the long-term growth in aftermarket revenues. All these factors continue to increase the embedded value of the business.
“Our focus on operational efficiency and cost reduction and, in addition, the response we have made to the weakness of the dollar and other external challenges over the last few years have meant that the Group took early action to maintain its competitiveness and deliver a strong financial performance.
“The Group’s balance sheet is robust and its financial position and credit rating remain strong. Average net cash in the first quarter of 2009 was greater than in 2008. A successful bond financing has recently been completed, raising £500m repayable in 2019, further spreading the Group’s repayment profile.
“Rolls-Royce will continue to invest through the downturn, both in our existing businesses and in areas such as Civil Nuclear and Distributed Power. We will continue to place a high priority on investment aimed at reducing unit costs, improving efficiency and the management of inventory and working capital.
“Turning to our trading performance in 2009, it is clear that our customers and suppliers are being impacted by the global economic recession, reduced demand and the effects of financing constraints. There remain continuing uncertainties in some of the Group’s markets but our current view of the likely outcomes for 2009 is consistent with our planning assumptions. Our substantial order book has continued to grow in the first quarter.
“Our Defence, Marine and Energy businesses are expected to deliver good profit growth this year. As anticipated in February 2009, we expect our Civil Aerospace business’ underlying profits in 2009 to be lower than in 2008 as a result of a slowdown in activity on some original equipment programmes and lower growth in aftermarket revenues.
“At a Group level, we continue to expect underlying revenue growth in 2009, with underlying profit before taxes broadly similar to that achieved in 2008.
“As indicated in February, we expect a cash outflow in 2009 as a result of a lower order intake and associated deposits compared to last year and the impact on inventory of cancellations and the deferral of deliveries. This should be seen in the context of our continuing investment in product development and the assets required to deliver the substantial order book and is underpinned by the Group’s strong cash generation in prior years and its robust balance sheet. The Group’s average net cash balance will increase in 2009.”
The Group will report its interim results for the six month period ending 30 June 2009 on 30 July 2009.