Rolls-Royce (RR) Shares Fell 4.11% on a Trading Update and AGM

The Rolls-Royce Holdings PLC (LON: RR) share price fell 4.11% after issuing a trading update for the period up to 30 April 2023. The company faced challenges managing its supply chain as original equipment and aftermarket services volumes increased, especially in Civil Aerospace.

The company makes a significant proportion of its revenues from the civil aviation sector, so it is good to hear that demand in this segment is increasing. As a result, the firm reiterated its underlying operating profit guidance of £0.8-£1.0 billion and free cash flow guidance of £0.6-£0.8 billion in 2023, which remained unchanged.

Rolls-Royce expects to generate most of its free cash flows in H2 2023. In the civil aerospace division, the company noted that long-term service agreement large engine flying hours (EFH) were 83% of 2019 levels in the four months to 30 April. Therefore, as earlier predicted, the company was on track to reach its 80% to 90% target for the entire year. 

The conglomerate noted that the volume of shop visits and OE deliveries were on track to meet expectations. In addition, the company continues to win new business, winning its biggest-ever order of Trent XWB-97 engines during the period via an MoU for 68 engines (plus 20 options) for Air India. 

Rolls-Royce kept making good progress in its defence business, with its nuclear reactors being chosen to power the AUKUS submarine programme. In the United States, Bell's V-280 Valor aircraft, powered by RR’s AE1107F engines, cleared the protest period, allowing its teams to progress to the next phase, with the first aircraft entering into service in 2030. 

Within its power systems business, revenue growth was driven by demand for aftermarket services and exceptionally high order intake in the past year, especially for power generation solutions.

The company noted that it was getting better pricing on new orders, which is driving up margins, with the benefits expected to start showing in the second half of the year. The firm has experienced strong demand from marine customers, including an order for Series 4000 gensets for the U.S. Navy's Constellation Class frigate programme.

*This is not investment advice. 

Rolls-Royce (LON: RR) share price. 

The Rolls-Roye (LON: RR) share price fell 4.11% to trade at 149.20p, from Tuesday’s closing price of 155.60p.