This has hit RR SP today. It comes as no great surprise, the risk remains that additional measures will be needed and cost grows before they finally implement a fix.
Lets hope that the "reprioritisation of discretionary spend" to avoid impact to Cash Flow doesn't lead to new issues!
13 April 2018
TRENT 1000 PACKAGE C UPDATE
At our 2017 Full Year results on 7 March 2018 we outlined our management of certain Trent 1000 engine in-service issues and the estimated costs relating to our implementation of the solutions to address those issues.
As part of our ongoing inspection and testing of those engines we have decided to carry out additional engine inspections to those previously planned. The increased inspection frequency is driven by our further understanding of the durability of the Trent 1000 Package C compressor, a condition that we highlighted earlier this year. These inspections will be supported by service management and flight operations guidance to airlines to be issued by the airworthiness authorities.
This will unfortunately lead to additional disruption for our customers. There are 380 Package C engines currently in-service with airlines. This new regime does not impact Trent 1000 Package B engines or Trent 1000-TEN engines.
While the compressor technical issue was known at the time of our results, the requirement for more regular inspections will lead to higher than previously guided cash costs being incurred during 2018. We are reprioritising various items of discretionary spend to mitigate these incremental cash costs and our guidance for 2018 FCF remains unchanged at Group FCF for 2018 of around £450m +/- £100m.
Warren East, CEO, Rolls-Royce, said: "Our focus is on supporting our customers and doing all we can to minimise any impact on their operations. We sincerely regret the disruption this will cause to our customers and our team of technical experts and service engineers is working around the clock to ensure we return them to full service as soon as possible. We will be working closely with Boeing and affected airlines to minimise disruption wherever possible."
Looks like a reasonable deal, not core business and long term supply deal done. sold at 9.5 x EBITDA which I guess fits for the sector. Should help with simplification of RR, market likes it.
Rolls-Royce announced today that it has signed an agreement to sell L'Orange, a wholly owned subsidiary of Rolls-Royce Power Systems, to Woodward Inc., for an enterprise value of 700 million (£610 million).
L'Orange supplies fuel injection technology for engines that power a wide range of industrial applications including marine power and propulsion systems, special-application vehicles, oil and gas processing, and power generation.
L'Orange will remain an important partner and supplier for Rolls-Royce Power Systems in the future through a long-term supply agreement, with an initial term of 15 years.
In 2017, L'Orange reported pro forma sales of 244 million, pro forma underlying EBITDA of 74 million
" THE US DOLLAR vs THE JAPAN YEN (FX:USDJPY) This particular pairing is usually quite logical in its behaviour. The results in the immediate situation where we've no choice but to regard it as heading toward 102 currently. Some sort of bounce ..."
"While the LSE:RR.:Rolls-Royce recovery still has some way to go, today's annual results from the engines giant did at least banish a few painful memories for shareholders following previous results disappointments.And in producing figures at the ..."
Financials look good, but with so much adjustment it is a bit hard to be sure where we are, reported EPS from 220p loss in 2016 to 229p in 17 with 2.6 Bn gain on currency hedges (after 4.4 bn loss last time).
The more interesting results were 35% increase in large engine deliveries, 12% increase in widebodied flying hours.
Operating problems with Trent 900 and 1000 which cost 170m in 17, expected to DOUBLE in 2018 then peak in 2019, running through to 2022!. Relative to forecast Op Profit and FCF of 400m and 450m (both +-100m) that's an eye-watering screw-up and feels like an ongoing risk.
Power Systems reported to be improved under new leadership, results look flat so presumably work in progress
IFRS to be adopted in 2018, so 2017 results comparison provided, main impact in Civil Aerospace where current practice of recognition of future revenue and profit from long term agreements will cease, changing 550m profit to a 330m loss, Ouch! I guess it is a non-cash impact so probably not such an issue and an accountant may be able to confirm whether this will effectively defer tax liability which sounds like a good think. The US tax changes looks like it is a big help when RR does get round to reliable profit generation.
Interesting comment on increased R&D spend on small modular reactors, unclear how much and chances of success, but would be a big opportunity if successful. No Trent 1000 problems here hopefully!
After all the restructuring discussion over the last couple of years, surprised to see employees increased from 49900 to 50000. Hopefully lots more engineers and technical specialists and fewer managers.
FY Results due on Wednesday Sunday Times has some comment on what to expect. Key points summarized below.
RR certainly needed streamlining, but ultimately it will be the fight for market share which determines success, hopefully the cost cutting will not disrupt development marketing and delivery of world beating products.
Rolls-Royce is planing more cuts of management ranks. Warren East has hired consultant Alvarez & Marsal to streamline the company. Since East joined in 2015 about 600 executives and senior managers have left/been cut.
East, due to provide strategy update alongside annual results with underlying pbt of £878m last year analysts estimate.
East targets increasing annual cash flows from an estimated £129m last year to £1bn by 2020 by when the company is expected to have more than 50% of the market for engines for wide-body aircraft.
Last week, East admitted he had underestimated the challenge he faced when he became chief executive. I didnt know quite how bad it was. I dont think anybody did, he told The Times.
There was an accounting fog. We were reporting profit that looked good but if you looked at the numbers, we hadnt faced up to the reality of it: a big gap had developed between profit and cash.
" FTSE FOR FRIDAY (FTSE:UKX) Our 100% success rate over FTSE for FRIDAY movements managed to remain intact last week but we're losing confidence due to the markets frequent inability to match secondary targets. This, often, can be a sign of ..."
This can't be helpful, maybe it is what has been pushing down the SP of late. Some costs to rectify but probably the reputation impact more of a concern, hopefully these issues can soon be put behind them.
Rolls-Royce suffers fresh wave of troubles with Dreamliner engines
Air New Zealand has been forced to ground some of its flights because of problems with their Rolls-Royce engines, the latest in a long line of issues with the British engineering companys products.
The airline said there have been two recent events with the Trent 1000 engines on its Boeing 787 Dreamliner aircraft. There had resulted in flights being cancelled.
New Zealands aviation safety board confirmed it was investigating engine abnormalities on the carriers aircraft in the past week.
Air New Zealand's 787 airliners are powered by Rolls-Royce's Trent 1000 engines
In the most recent incident a 787 was taking off from Auckland when the pilots noticed problems. They shut down the engine and returned to the airport. Another flight earlier this week bound for Buenos Aires experienced similar issues. No one was injured in either event.
Air New Zealand is the latest Rolls customer to suffer problems with the Trent 1000 engines on the 787. Japanese airline ANA first reported issues with Trent 100s in the summer of 2016. The problem was thought to relate to blades in the turbine corroding far earlier than expected, resulting in the engines being shut down. A few weeks later Virgin Atlantic said it was had also experienced similar troubles with its Trent 1000 engines.
Both airlines took aircraft out service for urgent maintenance, causing hundreds of flight cancellations.
Rolls - which has more than 400 of the $10m engines in service - has acknowledged the problems. At the companys half-year results in August it warned investors to expect increased activity in second half related to Trent 1000 maintenance programme to address a number of technical issues.
In response to the latest troubles with Air New Zealands engines, Rolls said it was working with the airline to minimise disruption and restore the aircraft to flight status.
A spokesman added: Its not uncommon for long-term engine programmes to experience technical issues during their life and we manage them through proactive maintenance. This is the continuation of work which started last year to upgrade Trent 1000 engines to the latest standard.
Quite a change from strong move up to 980 ish just a month ago to 839p and falling on Friday. No sign of that slowing and doesn't look like much support until around 775p. Doubt it will get as low as that, I think it is already good value long term and having sliced profits into the rise I will be happy to buy back at current price or below once it seems that the knife has hit something less penetrable than my hand.
Much of the UK market is down with a range of worries, Sterling strength and in what seems like contradiction Brexit fears, an overpriced US market etc, RR seems to have been hit harder than most, sterling is probably a big factor in that and maybe some RR specific factors like departure of sales head Schultz to AIrbus and changes to accounting standards from 1st Jan which effectively means RR will have to book Total Care maintenance contract value when it is actually used, not at contract signing, a significant deferment of revenue recognition. That is presumably a non-cash impact but will affect reported numbers (and possibly defer tax liability?).
Meanwhile the core business seems to be gradually turning with the much needed changes being driven through by WE. The market for aircraft seems to active with many new orders announced and the demand from Asia and ME seemingly insatiable (although sadly RR no longer participating in the strong market for narrow bodied jets, 320s ect).
RR recovered from one of my worst holding losses to a decent profit, a chunk of which I have banked, halving my holding so will be happy to add into this weakness.
RR a world class British engineering business, lets hope a low SP doesn't lead to another ARM.
Rolls-Royce Holdings Plc is joining Airbus SE and Siemens AG in their quest to develop a 100-seater hybrid electric aircraft, giving the U.K. engine maker a seat at the table of a potential promising aviation technology.
Rolls is tasked with helping develop a 2 megawatt electric drive for the aircraft, according to people with knowledge of the matter who asked not to be identified as the information is private. A formal accord with Rolls could be announced as soon as Tuesday, they said.
Step by step, Siemens and Airbus are moving closer toward their goal of producing a single-aisle plane with a 20 to 40 megawatt electric drive. Siemens already demonstrated smaller aircraft with 60 kilowatt drive systems at air shows this year. The two companies initially set a goal to make a two-seater electric aircraft, dubbed the e-fan, that would have been used as a pilot trainer and tour-operator.
Spokespeople for Siemens, Airbus and Rolls declined to comment.
Today's update a bit of a mixed bag, Marine affected by depressed oil market, defense affected by order timing. "Civil Aerospace, we continue to achieve our key targets for customer deliveries while managing in-service issues".
"Overall, while we have a good deal left to do in the last two months of the year, our performance for 2017, for revenue, profit and free cash, remains on track."
Looking beyond 2017, Warren East added: "Operationally, we are making good progress ramping up production, bringing new large civil engines to market and enhancing further our aftermarket capabilities across all our businesses...
Some interesting comments on long term
Warren East added: "I am comfortable with our strategic direction and how we are investing in the long-term. We know that the growth in electrification and digitalisation will offer substantial and wide-ranging opportunities and we are now investing accordingly. The businesses in our portfolio have different roles to play as we create new cutting-edge technologies to deliver the cleanest, safest and most competitive solutions for our planet's vital power needs. By increasing our expertise and scale in activities where electrification is relevant today, such as Power Systems, we will be better placed to benefit where electrification is still some years away, such as for propulsion systems for Civil Aerospace. Taking the right steps today and tomorrow will enable us to realise our ambition to be the world's leading industrial technology company."
"Transition to IFRS 15 - next year's results on current basis and IFRS 15 basis"- Oh great more conflicting numbers to reconcile!
" LSE:RR.:Rolls-Royce has overcome plenty of problems of its recent past. Instead of profit warnings, the noise has been more positive and Rolls shares have surged by over 90% since the 2016 three-year low when they briefly fell below Â£5. However, ..."
"and a refuelled car would be lighter than an empty car." Only if the hydrogen is stored at low pressure in a balloon strapped to the roof of the car. The wind resistance would certainly increase fuel consumption and make the car very unstable in a cross-wind.
330 neo maiden flight last week, RR is sole engine supplier with the Trent 7000.
A few interesting points including a slating of Pratt and Whitney for delays supplying 320 neo, Rolls also late for 33meo.
Rolls-Royce says the bigger new engines are 10 percent more efficient and half as noisy as the previous generation."
"Chief Operating Officer Fabrice Bregier said Airbus had decided to improve the planes maximum take-off weight by around 4 percent to 251 tonnes so that the A330neo can serve longer routes such as Kuala Lumpur to London from 2020" Might help sales, but changing specs mid project don't normally help schedule and cost, I think we have seen that somewhere before
Overall, seems a big step forward for Airbus and RR
The energy/power world is certainly in a very interesting phase and I get the feeling that there will be a huge move over the next 10-20 years towards smaller scale power generation technology. This is one example, but the other one I've been looking closely at recently are fuel cells, which Rolls Royce have also been working on; and no doubt, given your nom de plume, you will know all about. What reignited my interest was an RNS from Ceres Power saying they had run successful year long trials on domestic fuel cell units (generates electricity from the natural gas supply to power individual homes.) And it seems progress is being made in producing stable units for allsorts of different applications. With the political momentum towards electric vehicles fuel cells could be huge. The big problem with battery powered cars is the refuelling time. If electrical vehicles could be powered by fuel cells from hydrogen for instance, refuelling would be just as quick as it is now (and a refuelled car would be lighter than an empty car.)
An important report assessing the viability of new mini nuclear power plants for the UK to be published this week is expected to give the green light to develop designs proposed by a British consortium led by Rolls-Royce.
The Department for Business, Energy and Industrial Strategy (BEIS) is set to issue a study which formally ends a competition between different types of low-carbon power generation to assess which should be supported.
" THE DOW & BITCOIN (DOWi:DJI & BTCUSD) We've quite strong suspicions about crpyto-currencies, primarily due to reliable historical information as quite a few of the exchanges seemed run by enthusiasts giving widely different rates. In fact, ..."
Key Takeaways From the September Fed Meeting
Share On Facebook Print
By Harriet Torry
Federal Reserve officials didn't raise short-term interest rates Wednesday, but a December increase remains on the table. Meanwhile, the central bank said it would initiate in October its long-telegraphed plan to shrink its securities holdings. Here are key takeaways from the Fed's two-day policy meeting:
Looking to December
The Fed's summary of economic projections suggests officials are still on track to raise short-term interest rates once more this year, most likely at the Dec. 12-13 meeting when Chairwoman Janet Yellen will hold her next press conference. The Fed meets again Oct. 31-Nov. 1, but no press conference is scheduled then. Fed officials expect to raise rates three more times next year, a forecast unchanged from when they last submitted economic projections in June. Officials lowered their median forecast for the path of rates in 2019: They now expect two rate increases that year, down from three. Officials expect rates to rise once in 2020.
Trending Lower for Longer
Fed officials brought down their expectation for where they see interest rates settling in the longer run, to 2.75% from an earlier forecast of 3%. The drift downward reflects a lowering in officials' view of the so-called neutral rate, an underlying interest rate that is consistent with the economy operating at its full potential and expanding without overheating. Ms. Yellen told reporters that "because the neutral rate currently appears to be quite low by historical standards, the federal-funds rate would not have to rise much further to get to a neutral policy stance."
Will She Stay or Will She Go?
Ms. Yellen is keeping her cards close to her chest regarding what she think about her future as her term as Fed chairwoman ends Feb. 3, 2018. She reiterated Wednesday that she intends to serve out her current term, but said, "I'm really not going to comment on my intentions beyond that." She told reporters that she hasn't had a meeting with President Donald Trump since the early days of his presidency. The two have met just once, for about 15 minutes, in the Oval Office in February. Mr. Trump has said he is considering renominating Ms. Yellen, but that he is considering others for the post as well.
Roll On the Rolloff
The Fed in October will initiate its long-telegraphed plan to shrink the portfolio of bonds acquired after the 2008 crisis. That means the Fed will end its practice of fully reinvesting the principal payments of maturing bonds into new bonds and instead allow $10 billion in holdings to roll off without reinvestment every month. Those amounts will increase by $10 billion each quarter to a maximum of $50 billion from October next year. "Our balance sheet is not intended to be an active tool for monetary policy in normal times," Ms. Yellen emphasized Wednesday, adding that "we therefore do not plan on making adjustments to our balance-sheet normalization program."
Sticking to Its Guns
With the rolloff of its holdings ready to start, Ms. Yellen said there is now "a somewhat high bar to resume reinvestments," and only "a material deterioration in the economic outlook" would prompt the Fed to consider such a move. "It will be up to future policy makers to decide in the event of a severe downturn whether they think it's appropriate to again resort to adding assets to a balance sheet," she said.
So much for "expert" brokers and their followers.
I set automatic limit buys and sells for a falling market. RR fell nicely into my trap on Monday., it is now on a limit sell to make a decent profit should it drop 3%, or even more if it goes up further.
In this case I think neither. There was a report in the weekend press that the Chief Exec had warned cashflow targets for 2020 were not firm targets implying they may be missed and this sent the price down.
However, the actual results were good enough to boost the shares this morning. 150% increase in underlying profit sounds helped.
I did elect to redeem them this time I missed the last one so I had two lots to redeem.
I have emailed III this morning to see what they have to say. I agree its seems like hard work to pay a divi. apparently its to help offset your tax bill should the need arise. Not much chance in my case :-)
Important message from the Financial Conduct Authority:
Posting inside information that is not public knowledge, or information that is false or misleading, may constitute market abuse.
This could lead to an unlimited fine and up to seven years in prison.
If you have any information, concerns or queries about market abuse, click here.
The content of the messages posted represents the opinions of the author, and does not represent the opinions of Interactive Investor Trading Limited or its affiliates and has not been approved or issued by Interactive Investor Trading Limited.
You should be aware that the other participants of the above discussion group are strangers to you and may make statements which may be misleading, deceptive or wrong.
Please remember that the value of investments or income from them may go down as well as up and that the past performance of an investment is not a guide to its performance in the future.
The discussion boards on this site are intended to be an information sharing forum and is not intended to address your particular requirements.
Whilst information provided on them can help with your investment research you need to consider carefully whether you should make (or refraining from making) investment or other decisions based on what you see without doing further research on investments you are interested in.
Participating in this forum cannot be a substitute for obtaining advice from an appropriate expert independent adviser who takes into account your circumstances and specific investment needs in selected investments that are appropriate for you.