'Yippee!'
What are you so excited about, Voice?
'You're writing about the astral plane again!'
Er, no ... this is a PR email, mate.
'What?! You've got a PR email about the astral plane?! Who sent you that?'
Christ! I'm not writing about the astral plane! I'm writing about Rolls Royce.
'Oh.'
Anyway ...
Rolls Royce: a "burning platform" that must transform to survive.
'Who sent you that, boss?'
Wealth Club.
Let's find out what this is all about ...
'A Rolls Royce on the astral plane!'
I'm not writing about the astral plane! Those days are over. Open your ears!
'I ain't got no ears!'
You've got astral ears, haven't you?
'Of course.'
Well, open those!
Anyway ...
Rolls Royce, the British aero-engine manufacturer, has announced its full year results:
Underlying operating profit of £652m, £238m higher than the prior year, with the increase driven by Civil Aerospace and Power Systems. Free cash flow was £505m versus an outflow of £1.5 billion in the prior year.
Underlying operating profit guidance of £0.8-£1.0bn and free cash flow of £0.6-£0.8bn in 2023.
Transformation programme in place to deliver further performance improvements from 2023, with strategic review underway to identify investment priorities.
Well ...
What does our Charlie say?
'He's going to talk about the astral plane.'
Shut up!
Charlie? Come on, son.
Charlie Huggins, Head of Equities at Wealth Club, comments:
"It's not uncommon for a new CEO to do some kitchen sinking. But when the incoming leader describes the existing business as a 'burning platform' you know you have serious issues."
'Oh, I know what's happened here.'
What?
'The new CEO has been talking about the astral plane, but Charlie probably won't mention it.'
Shut up.
"'Every investment we make we destroy value', according to new CEO, Tufan Erginbilgic. Based on Rolls Royce's performance over the last decade it's hard to disagree.
"A business like Rolls must spend large amounts upfront to secure long-term maintenance contracts. This means it has to wait many years for the cash to roll in. And if anything disrupts those cash flows - like a global Thing - you can easily spend more than you get back, especially if you invest unwisely in the first place.
"Rolls Royce has burned through cash at a rate of knots over the last decade. That clearly isn't sustainable. Significantly improving Rolls Royce's cash generation has to be the number one priority for the new CEO.
"Transforming Rolls Royce will be far from easy. The capital intensity of the business won't go away. And while tackling the extreme complexity and inefficiency is a start, it probably won't be enough. A cultural transformation is also required, and that always takes time.
"The good news for the new CEO is that no one is really expecting miracles. Investors have endured years of severe turbulence - and many have already headed for the emergency exits. If the new pilot can at least avoid a crash landing, it would be a good start."
Thanks, Charlie.
'Well, that was disappointing.'
ENDS
ENDS
ENDS
...
Anything else?
No.
There is nothing else.
And sometimes ... that's the way I like it, you dig?
'I can dig it, Mikey!'
Nice one, Voice.
Laters.
'Bye!'
