Business Knowledge Flashcards
What 4 main segments does the company operate in?
Civil Aerospace - Among the world’s largets aricraft engine makers, specialising in wide body only
Defence - Military jet engines for transport, patrol and combat + marine engines and nuclear propulsion for submarines
Power systems - Through ‘MTU’ brand; focuses on creating sustainable, climate neutral solutions for power generation
New Markets - Early-stage businesses, leveraging existing expertise to develop sustainable products for new markets
What are some major projects RR are currently involved in?
-UltraFan engine demonstrater
-Spirit of innovation aircraft
-Small Modular Reactors
What do you know about the UltraFan engine demostrater
Next-generation turbofan, largest in world, promising a 25% greater efficiency than first-generation Trent engines.
In 2023 they succesfully ran the fan to full power on 100% sustainable aviation fuel
Remains demonstrator, no immediate production orders
What do you know about the Spirit of Innovation aircraft
Set world record in 2021 as worlds fastest all-electric plane
What are Small Modular Reactors
RR is leading a UK consortium to create compact nuclear reactors to supply low-carbon power
Give me a brief rundown of the business history of RR, not including figures
Faced sever challenges in 2020-21, primarily because of pandemic, however has since rebounded strong due to ‘power by the hour’ revenue model, where airlines pay based on engine flying hours rather than outright engine sales
New CEO appointed start of ‘22, Tufan Erginbilgic, started turnaround plan; commercial optimisation and cost reduction across all divisions; by late ‘23, company cut around 6% of it’s workforce removing layers of middle-management, also post-pandemic aviation recovery
Give me financial figures of their recovery since ‘20
(4)
in ‘23 revenues climbed to £16.49bn, up 22% YoY
swinging from loss to statutory pre-tax profit
RR share price is FTSE 100’s top performer, rising over 500% in 2 years
As of early 2025, market cap is around £52bn
Looking to reinstate shareholder distributions for full year 2024, as they were stopped in 2020, subject to final board approval at the ‘25 AGM
Give me figures from ‘24 half year results
Operating profit up 74% YoY to £1.1bn
Free cash flow up 225% YoY at £1.2bn
Net debt reduced to lowes position in more than 5 years
Upgraded to investment grade by Fitch and SnP
Repayment of 2025 bond maturity with available cash
How are RR commited to sustainability?
-Ensuring all its aero engines are compatible with 100% sustainable aviation fuel by 2023, a milestone it has achieved -> all RR civil engines have been successfully tested
-Goal to reach net-zero carbon across its operations and products by 2050
What are some issues that RR are currently facing>?
Industry position: In duopoloy/oligopoly with GE Aerospace and Pratt & Whitney -> only companies capable of designing large turbofan engines
- this elads to fierce competition with strong R&D costs -> especially as RR only do Widebody meaning a smaller market
Constant balance between investing in future tech and delivering short-term financial performance
Supply chain management:
RR warn issues could persist into 2024 for amterials and components;
-Geopolitical tensions with Russia, supply constraints of specialised materials
-Engine component bottleneck with a limited number of specialist suppliers
What are some recent large contracts won?
Unity Contract
-In Jan 2025, ;argest-ever contract with UK ministry of defence, valued at £9bn
-Covers all elements of nuclear reactors that power the Royal Navy’s fleet of submarines: Research, design, manufacturing and in-service support
Cathay Pacific Engine Supply Agreement
-August 2024, major contract to supply engines for a new fleet of aircraft ordered by Cathay Pacific:
-60 Trent 7000 engines, including a TotalCare service arrangement; where Rolls Royce are responsible for maintenance costs
Other notable commercial success in 23/24:
-Air India, Turkish Airlines, Emirates, EVA Air, Delta Airlines
-Company current powers ⅓ of widebody aircraft in service, in 2023 over half of new aircraft delivered were powered by their engines
Typhoon Engine SUpport
-2023, UK ministry of defence awarded Rolls Royce a six-year agreement from Jan 24 -> Dec 29 to support the EJ200 engine that powers the Typhoon aircraft
-£500 million
What is their market position in terms of size?
-Company current powers ⅓ of widebody aircraft in service, in 2023 over half of new aircraft delivered were powered by their engines
