Rolls Royce (RR Stock) share price drops as CEO East prepares to leave


The Rolls Royce share price has struggled over the past 12 months as it continues to be buffeted by the ebb and flow of the pandemic and the difficulties of the travel sector, although it has when even managed to recover well from the dark days of October. 2020 lows, when it traded as low as 34.70p.

Since then the share price has more than tripled, but over the past six months the shares have traded choppy between highs of 150p in November last year and found an element of interest buy just above the 100p area, with technical resistance just above. the AD of 200 days.

To its credit, the company has taken significant steps over the past 12 months to reduce its workforce, reduce costs and improve cash flow, and has expressed optimism that it will be able to reduce another £1.3 billion this year.

In the first half of this year, the various measures taken to strengthen finances generated a windfall first half profit of £393m, but despite efforts to diversify its business model, it still remains heavily dependent on aircraft flying hours. civil aviation engines (EFH), for a good proportion of its revenues.

The return of transatlantic travel will no doubt have helped towards the end of last year, but the impact of Omicron’s restrictions could not have come at a worse time, meaning the company missed its annual target 55% of 2019 levels for 2021. , although today’s figures showed that EFH managed to reach 57% in the second half of this year, which could be described as a small victory.

There have been some good wins on the company’s defense side in recent months with the Pentagon’s £1.9bn deal for its F-130 engines, which will be used to power the B-52 Stratofortress for the next 30 years.

The company said its cash flow turned positive in the third quarter, so free cash outflow for 2021 would likely be lower than the previous forecast of £2 billion.

Today’s full-year figures saw Rolls Royce make a small profit of £10million, after last year’s £3.1billion loss. However, this news was overshadowed by news of CEO Warren East stepping down at the end of 2022, after eight years in the top job. This is a blow for the company at a key stage in the recovery process.

East has been a key part of the turnaround plan seen early in his tenure and has been at the forefront of it. The last thing the company needs in rough waters is for the ship’s captain to quit.

According to the figures, underlying revenue from continuing operations was £10.9 billion, generating underlying operating profit of £414 million. Free cash flow improved but remained negative at £1.44bn, with net debt standing at £5.16bn.

The balance sheet is in better shape thanks to the 2 billion pounds of disposals announced in recent months, including the sale of ITP Aero for 1.7 billion euros which should be finalized in the first half of this year.

Small Modular Reactor (SMR) business is also gaining momentum after the government invested £210m on top of £145m in private investment as the company steps up its contribution to the transition from British economy towards reducing its carbon output.

This diversification of activities continued in December with an £85 million agreement with Qatar for the construction of new low-carbon nuclear units.

In its civil aerospace unit, Rolls Royce managed to secure 58 engine orders for the Airbus A350 freighter, while underlying revenue was £4.5bn, down 10% from Last year. The unit’s underlying losses were reduced to £172m.

He also announced that the company’s Power Systems unit was developing MTU engines that could use environmentally friendly methanol fuel for shipping, as the struggling British company seeks to further diversify away from its core business, which is still civil aviation.


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