Rolls-Royce trading in line despite headwinds

Rolls-Royce Holdings was trading in line with expectations, despite challenging market conditions, it was set to confirm at its annual general meeting in Nottingham on Thursday.

The FTSE 100 group’s chief executive Warren East was also to tell shareholders that the outlook for the year as a whole remained unchanged.

"Despite steady market conditions for most of our businesses, 2016 continues to be a challenging year overall as we sustain investment and start to transition major products in Civil Aerospace, and tackle weak markets in Marine."

The firm was expecting profit before financing charges and tax to be significantly weighted towards the second half, as a result of the previously anticipated headwinds in 2016 and the resulting lower level of overall performance compared to last year.

Rolls-Royce was looking at a second half of increased large engine deliveries, good underlying growth in aftermarket revenues and expected incremental benefits from its ongoing restructuring programmes.

“Free cash flow is also expected to be significantly more weighted towards the second half than in 2015,” the company said.

“This largely reflects the lower level of first half profit compared to the previous year and the strong cash flow performance at the end of 2015, some of which reversed in the first month of 2016.”

Rolls-Royce’s 2016 outlook excluded the year-on-year effect of foreign exchange translation.

It said that if rates remain at the average levels seen so far in 2016, the movement would improve reported revenues by around £450m and improve reported profit before tax by around £50m.

The company was also reporting that it has made progress on the early stages of its transformation programme, and was well on track to deliver expected cost savings in 2016 of between £30m and £50m.