Rolls-Royce updates 2015 guidance

Rolls-Royce updated its 2015 guidance, including a preview of its expected half-year results. In Civil Aerospace, Rolls-Royce continues to expect 2015 underlying revenue and profit within the guided range provided in February of £7,000m to £7,300m and £800m to £900m respectively. However, the company now expects the impact of reduced Trent 700 deliveries to be greater than initial estimates, reflecting further adverse developments in the demand for OE and spare engines and related pricing. In addition, lower-than-expected demand for engines to power business jets and a softening regional aftermarket will also adversely impact profit. These market headwinds should be balanced by good growth in its widebody aftermarket and a larger-than-expected benefit from the reversal of a balance sheet provision on the Trent 1000 launch, as a result of an expected significant improvement in operating performance, and by improved retrospective TotalCare contract profitability. The value of the provision release and contract profitability are expected together to contribute around £200m, somewhat more than previously expected. Rolls-Royce continues to expect 2015 underlying profit before tax to be phased more to the second half than in 2014, led principally by Civil Aerospace and Power Systems. As a result, first half underlying profit before tax is expected to be between £390m and £430m, or around 30% of the full year, compared with roughly 40% in 2014. Free cash flow is expected to be between £(570)m to £(620)m compared with £(347)m in the first half of 2014.