4 August 2022
ROLLS-ROYCE HOLDINGS PLC - 2022 Half Year Results
Focused on operational and commercial drivers to address risks and deliver better performance
· Good progress with growth in order intake, revenue and cash flow
- Another record quarter in Q2 for order intake in Power Systems
- £1.1bn free cash flow improvement due to commercial discipline and increased flying hours
- Underlying profit margins were lower in the first half, but are expected to improve in the second half
· Managing external challenges with operational and commercial discipline
- Concentrating spend with leading suppliers; increased inventory to address supply constraints
- Controlling costs and applying contractual and pricing discipline to limit inflation risk
· Delivering on our commitments
- 2022 Group guidance unchanged with focus on managing risks
- ITP Aero disposal received regulatory clearance and is progressing towards completion
- Medium-term Civil Aerospace targets reflect commitment to become leaner and more agile
Warren East, Chief Executive said: "We have progressed well in the first half of the year, with more than a £1bn improvement in free cash flow, strong order intake in Power Systems, increased engine flying hours and commercial discipline in Civil Aerospace, and targeted investment to support longer-term growth in Defence and New Markets. We are actively managing the impacts of a number of challenges, including rising inflation and ongoing supply chain disruption, with a sharper focus on pricing, productivity and costs. As a result of the actions we have taken over the last few years, our Civil Aerospace business is becoming leaner and more agile, and we are executing on the levers of value creation we shared at our investor event in May. This is setting us up to deliver on our commitments this year and in the future. We are making choices to manage the current challenges, deliver better returns, reduce debt, and generate long-term sustainable value."
Half Year 2022 Group financial performance
|
Statutory 2022 H1
|
Statutory
2021 H1
|
Underlying 2022 H1
|
Underlying 2021 H1
|
£ million, continuing operations
|
Revenue
|
5,600
|
5,159
|
5,308
|
5,227
|
Gross profit
|
1,062
|
814
|
942
|
1,097
|
Operating profit
|
223
|
38
|
125
|
307
|
Operating margin %
|
4.0%
|
0.7%
|
2.4%
|
5.9%
|
(Loss)/profit for the period
|
(1,611)
|
394
|
(188)
|
104
|
(Loss)/earnings per share (pence)
|
(19.29)
|
4.73
|
(2.24)
|
1.25
|
£ million
|
2022 H1
|
2021 H1
|
Free cash flow from continuing operations
|
(68)
|
(1,174)
|
Group free cash flow
|
(77)
|
(1,151)
|
£ million
|
2022 H1
|
2021 H1
|
Net cash inflow/(outflow) from operating activities
|
597
|
(679)
|
|
|
|
£ million
|
30 Jun 2022
|
31 Dec 2021
|
Net debt
|
(5,142)
|
(5,157)
|
Good progress with growth in order intake, revenue and cashflow
Demand for our products and services is growing with another period of record order intake in Power Systems, continued recovery in Civil Aerospace engine flying hours and high visibility of future revenues in Defence with a strong order book. We are focusing on operational and commercial drivers to drive better performance. For example, we are strategically partnering with key suppliers, robustly applying contractual pricing protection in long-term contracts and utilising commodity hedges and fixed price purchasing agreements. We are also focused on maximising efficiency and productivity in manufacturing, such as increasing the repair and reuse of spare parts in services and de-risking original equipment (OE) deliveries with a temporary increase in inventory.
Our underlying profit margins fell in the period. Adjusting for foreign exchange movements, contract catch-ups and provision movements our underlying profit margins slightly increased in the period. The prior period included legacy spare parts sales in Defence, which had a £45m positive profit impact, and a foreign exchange movement in Civil Aerospace of approximately £270m reflecting a one-off transactional revaluation credit.
Free cash outflow from continuing operations of £68m improved by £1.1bn on the prior period, led mostly by increased flying hour receipts in Civil Aerospace. Working capital (excluding long term service agreement (LTSA) balance movements) was a £269m outflow in 2022 H1 with higher inventory resulting from the impact of supply chain disruption partly offset by improved payables performance.
Managing external challenges with operational and commercial discipline
The external environment remains challenging, with the war in Ukraine, inflationary pressures, and supply chain constraints all impacting our business. We expect these issues will persist into 2023 and have been managing our business to address and minimise the impact.
We are tightly controlling costs and have consolidated our supply chain, focusing on the best performing suppliers, and we have long-term agreements and hedges in place that offer reasonable protection against
near-term price increases. Inventory has increased across the Group, due to supply chain constraints, and we aim to reduce inventories in the second half of the year. In many of our long-term contracts we are able to pass on a proportion of higher input costs to our customers through commercial discipline on pricing and robust contract management.
We have faced some challenges in hiring, particularly for experienced engineers with certain skills and technical expertise. We are addressing this with actions to attract, train and retain talent. Our early years recruitment has been strong and our retention rates are good.
Delivering on our commitments
We are working across the Group to increase the productivity and efficiency of our operations and improve commercial discipline to drive a better and more balanced financial performance.
In May, we hosted an investor day at our Civil Aerospace operations in Derby and committed to medium-term financial targets for the business founded on five value drivers (see page 6). We have focused on these in the first half of 2022, with rigorous supply chain management, leaner manufacturing, and strong commercial discipline helping to address supply chain and inflation challenges. Our new engine programmes are driving fleet growth and will, as they mature, need less engineering time, enabling us to spend less and shift our focus towards extending time on wing and lowering shop visit costs.
We have committed to rebuilding our balance sheet in the medium-term. Our liquidity position remains strong with £7.3bn of liquidity including £2.8bn in cash at the period end. Net debt of £(5.1)bn included £1.9bn leases and we have no significant debt maturities before 2024. No interim shareholder payment will be made for 2022.
We have received all the required regulatory approvals for the sale of ITP Aero and expect the transaction to complete in the coming weeks. The proceeds will be used to reduce debt by repaying early the £2bn loan, which is supported by an 80% guarantee from UK Export Finance. This loan expires in 2025 and is our only drawn debt exposed to interest rate movements.
Outlook and financial guidance
Our Group guidance for 2022, as first set out on 24 February, is unchanged. We continue to expect:
· low-to-mid-single digit underlying revenue growth
· full year underlying operating profit margin to be broadly unchanged on the prior year (2021 FY: 3.8%)
· modestly positive free cash flow in 2022
Our full year guidance is based on expected improvement in Civil Aerospace in the second half driven by planned higher spare large engine sales and large engine shop visits.
We are well positioned to deliver on our near and medium-term commitments despite the increasing challenges and risks around the pace of global economic growth, supply chain disruption and rising inflation that are expected to persist into next year.
Results webcast and conference call
A webcast will be held at 09:00 (BST) today and details of how to join are provided below. Conference call details are also available for those who would prefer to dial-in. Downloadable materials will be available on the Investor Relations section of the Rolls-Royce website.
Webcast details
To register for the webcast, including Q&A participation, visit the following link:
https://edge.media-server.com/mmc/p/crfwe8bs
The same link will provide access to a replay of the webcast shortly after the event concludes.
Conference call details
To register for the conference call, visit the following link: https://register.vevent.com/register/BIb3ce38aad37f417d92343128228fb6bc
After registering you will receive a list of dial-in details and a personal PIN code.
Downloadable materials
Please visit the Investor Relations section of the Rolls-Royce website to download our Half Year Results materials: https://www.rolls-royce.com/investors/results-and-events.aspx
Trading update
Our next scheduled trading update will be on 3 November 2022.
Enquiries:
Investors: Isabel Green +44 7880 160976 / Jeremy Bragg +44 7795 840875
Media: Richard Wray +44 7810 850055
Photographs and broadcast-standard video are available at www.rolls-royce.com.
A PDF copy of this report can be downloaded from www.rolls-royce.com/investors.
This results announcement contains forward-looking statements. Any statements that express forecasts, expectations and projections are not guarantees of future performance and will not be updated. By their nature, these statements involve risk and uncertainty, and a number of factors could cause material differences to the actual results or developments. This report is intended to provide information to shareholders, is not designed to be relied upon by any other party, or for any other purpose and Rolls-Royce Holdings plc and its directors accept no liability to any other person other than under English law.
LSE: RR.; ADR: RYCEY; LEI: 213800EC7997ZBLZJH69
Underlying income statement 1
£ million
|
2022 H1
|
2021 H1
|
Change
|
Organic Change 2
|
M&A 3
|
FX
|
Underlying revenue
|
5,308
|
5,227
|
81
|
223
|
(148)
|
6
|
Underlying OE revenue
|
2,194
|
2,239
|
(45)
|
42
|
(76)
|
(11)
|
Underlying services revenue
|
3,114
|
2,988
|
126
|
181
|
(72)
|
17
|
Underlying gross profit
|
942
|
1,097
|
(155)
|
(135)
|
(19)
|
(1)
|
Gross margin %
|
17.7%
|
21.0%
|
(3.3)%pt
|
(3.4)%pt
|
|
|
Commercial and administrative costs
|
(499)
|
(444)
|
(55)
|
(71)
|
10
|
6
|
Research and development costs
|
(371)
|
(386)
|
15
|
8
|
4
|
3
|
Joint ventures and associates
|
53
|
40
|
13
|
11
|
−
|
2
|
Underlying operating profit
|
125
|
307
|
(182)
|
(187)
|
(5)
|
10
|
Underlying operating margin %
|
2.4%
|
5.9%
|
(3.5)%pt
|
(3.8)%pt
|
|
|
Financing costs
|
(236)
|
(174)
|
(62)
|
(62)
|
1
|
(1)
|
Underlying (loss)/profit before taxation
|
(111)
|
133
|
(244)
|
(249)
|
(4)
|
9
|
Taxation
|
(77)
|
(29)
|
(48)
|
(50)
|
1
|
1
|
(Loss)/profit for the period
|
(188)
|
104
|
(292)
|
(299)
|
(3)
|
10
|
Underlying (loss)/earnings per share (pence)
|
(2.24)
|
1.25
|
(3.49)
|
(3.61)
|
|
|
Note: H1 2021 transactions were translated at an achieved rate of £$1.39, close to the average prevailing exchange rate, whereas H1 2022 transactions were translated at £$1.50, close to the average rate of our hedge book.
Underlying revenue of £5.3bn was 4% higher led by market recovery in Power Systems and improvement in Civil Aerospace including a £241m LTSA catch up (2021 H1: £160m). Defence revenue was lower against a strong comparative partly due to the non-repeat of legacy spare parts sales in the prior period.
Underlying gross profit of £942m included a £219m Civil Aerospace LTSA catch up (2021 H1: £166m) partly offset by a £(29)m charge in Other businesses related to a legacy business and a £(22)m negative contract charge in Defence due to inflation risk. The £(135)m organic change also included the non-recurrence of legacy spare parts sales in Defence, which had a £45m positive profit impact in the prior period, a foreign exchange movement in Civil Aerospace of approximately £270m reflecting a one-off transactional revaluation credit in the prior period, and other movements which had a positive profit impact in the current period. After taking these items into account, gross profit was slightly ahead period on period.
Underlying operating profit was £125m, due to lower underlying gross profit and included £(371)m in research and development costs with an increase in spend in Defence, Power Systems and New Markets balanced by lower spend in Civil Aerospace. Commercial and administrative costs increased by 16% reflecting the absence of furlough assistance received in 2021, increased activity as markets recover in Power Systems and Civil Aerospace and the ramp-up of activity in New Markets.
Underlying loss before taxation of £(111)m included net financing costs of £(236)m of which £(162)m related to interest bearing debt.
Underlying loss for the year of £(188)m included a tax charge of £(77)m (2021 H1: £(29)m).
Underlying loss per share of (2.24)p was based on 8,345m weighted average shares in issue.
Business unit underlying performance
£ million
|
Underlying revenue
|
Organic Change 2
|
Underlying operating (loss)/profit
|
Organic Change 2
|
Trading cash flow
|
Change
|
Civil Aerospace
|
2,339
|
174
|
(79)
|
(124)
|
63
|
1,127
|
Defence
|
1,609
|
(164)
|
189
|
(86)
|
89
|
−
|
Power Systems
|
1,371
|
229
|
119
|
80
|
(76)
|
(147)
|
New Markets 4
|
1
|
−
|
(48)
|
(20)
|
(30)
|
1
|
Other businesses 4
|
(7)
|
(11)
|
(29)
|
(25)
|
(1)
|
21
|
Corporate/eliminations 4
|
(5)
|
(5)
|
(27)
|
(12)
|
(24)
|
(2)
|
Total (continuing operations)
|
5,308
|
223
|
125
|
(187)
|
21
|
1,000
|
For footnotes referenced in tables on pages 4-13, see page 13.
£ million
|
2022 H1
|
Organic Change 2
|
FX
|
2021 H1
|
Change
|
Organic Change 2
|
Underlying revenue
|
2,339
|
174
|
(3)
|
2,168
|
8%
|
8%
|
Underlying OE revenue
|
660
|
(56)
|
(6)
|
722
|
(9)%
|
(8)%
|
Underlying services revenue
|
1,679
|
230
|
3
|
1,446
|
16%
|
16%
|
Underlying gross profit
|
256
|
(127)
|
3
|
380
|
(33)%
|
(33)%
|
Gross margin %
|
10.9%
|
|
|
17.5%
|
(6.6)%pt
|
(6.7)%pt
|
Commercial and administrative costs
|
(183)
|
(38)
|
−
|
(145)
|
26%
|
26%
|
Research and development costs
|
(202)
|
33
|
2
|
(237)
|
(15)%
|
(14)%
|
Joint ventures and associates
|
50
|
8
|
1
|
41
|
22%
|
20%
|
Underlying operating (loss)/profit
|
(79)
|
(124)
|
6
|
39
|
|
|
Underlying operating margin %
|
(3.4)%
|
|
|
1.8%
|
(5.2)%pt
|
(5.4)%pt
|
|
2022 H1
|
2021 H1
|
Change
|
Trading cash flow
|
63
|
(1,064)
|
1,127
|
2022 H1 key operational metrics:
|
Large Engine
|
Business Aviation/ Regional
|
Total
|
Change
|
OE deliveries
|
78
|
71
|
149
|
1
|
LTSA engine flying hours (EFH) (000's)
|
4,524
|
1,593
|
6,117
|
1,521
|
Total LTSA shop visits
|
321
|
156
|
477
|
27
|
…of which major shop visits
|
113
|
150
|
263
|
15
|
Note: H1 2021 transactions were translated at an achieved rate of £$1.39, close to the average prevailing exchange rate, whereas H1 2022 transactions were translated at £$1.50, close to the average rate of our hedge book.
Large engine LTSA flying hours were 4.5m, up 43% year on year. We are still in a relatively early stage of recovery at around 60% of 2019 levels. Total LTSA engines flying hours (which includes Business Aviation and Regional flying hours) of 6.1m were up 33% year on year. Inflation and supply chain challenges have increased and we are addressing the impact through tight cost control and robust long-term contracts with suppliers and customers that aim to pass through inflation risk. Shop visit volumes and OE deliveries were lower than planned in the period, mainly due to supply chain constraints and delays in spare engine sales. Shop visits and OE deliveries are both expected to accelerate in the second half as supply chain actions take effect and assembly rates improve.
- Underlying revenue of £2.3bn, up 8% on the prior period. OE revenue of £660m was down 8% reflecting the mix of engine deliveries with fewer large spare engines sold and more Business Aviation engines. Services revenue of £1,679m was up 16% on the prior period and included £241m positive LTSA
catch-ups (2021 H1: £160m).
- Underlying gross profit of £256m was £127m lower than the prior period and included £219m of LTSA catch-ups (2021 H1: £166m) and other movements which had a positive profit impact in the current period. These were offset by a foreign exchange movement in Civil Aerospace of approximately £270m reflecting a one-off transactional revaluation credit in the prior period. As a result, gross profit was broadly flat on the prior period. Approximately half of the revaluation unwound in 2021 H2.
- Underlying operating loss of £(79)m reflected the lower gross profit and included £(183)m in commercial and administrative costs, £(38)m more than the prior period due to business recovery and the absence of government furlough assistance schemes. This was partly offset by a £33m reduction in research and development costs.
- Trading cash flow was £63m, £1.1bn better than 2021 H1 driven mostly by higher EFH receipts. Shop visits also increased but at a slower pace. Working capital was modestly negative, but significantly better than the prior period, with higher inventory partly offset by increased payables with higher RRSP payables and warranties reflecting the recovery in flying hour and shop visit volumes in the first half. Trading cash flow included £(265)m outflow related to the settlement of excess foreign exchange derivative contracts and there was limited net impact from OE concessions in the period.
Outlook
Engine flying hours are expected to maintain the current trajectory and return to pre-pandemic levels in 2024 as global travel restrictions are lifted. In 2022, we expect 350-400 total OE deliveries and 1,100-1,200 total shop visits. We are focused on keeping costs low and maintaining productivity gains as shop visits increase. This supports our updated expectation for good (previously modest) revenue growth and improved profitability as well as a substantial improvement in trading cash flow in 2022, compared with the prior year.
Civil Aerospace medium-term outlook
On 13 May we announced new medium-term targets for our Civil Aerospace business based on a simplified value drivers framework and supported by expected flying hours recovery by 2024. A replay of the event is available on our website. We have guided:
· Underlying revenue growth at a low double-digit percentage compound annual growth rate
· Underlying operating profit margin expansion to high single digit percentage
· Trading cash flow to comfortably exceed operating profit
Our five Civil Aerospace value drivers highlight the operational side of our business and provide a deeper understanding of how the changes we have implemented are making it a better quality, more resilient, and more agile business which is set up to increase returns and deliver long-term sustainable growth.
1. Maximise service receipts with better pricing on customer contracts on a growing fleet as the market recovers
2. Reduce service costs by extending the time between shop visits (time on wing) as engine programmes mature and reducing shop visit costs with more repair and reuse of spare parts
3. Improve OE margins through increased productivity, controlled overhead costs and a focused purchasing strategy to reduce the cost of components and assembly
4. Grow Business Aviation with the ramp-up of the Pearl engine programme and market share gains
5. Investment cycle has passed its peak with less intense new product introduction, and the nature of spend reflects increased partnering to reduce capital intensity and a rebalancing towards cost reduction and product maturity work
Medium-term Civil Aerospace guidance summary
|
FY 2021
|
Medium-term
|
DRIVERS
|
|
|
Engine deliveries (large and business engines)
|
309
|
Mid teens CAGR
|
Shop visit volumes (large, business and regional engines)
|
953
|
Low double-digit CAGR
|
LTSA engine flying hours (large, business and regional engines)
|
10.3m
|
Approaching 2019 levels
|
FINANCIAL (underlying)
|
|
|
OE revenue
|
£1,612m
|
Low teens CAGR
|
Services revenue
|
£2,924m
|
High single-digit CAGR
|
Total revenue
|
£4,536m
|
Low double-digit CAGR
|
R&D charge as % of sales
|
10%
|
~5%
|
Operating profit margin
|
(4)%
|
High single-digit
|
Change in net LTSA balance
|
£66m
|
~£500m average pa
|
Trading cash flow
|
£(1,670)m
|
Comfortably exceeding operating profit
|
Base year for medium-term compound average growth rate (CAGR) is 2021
£ million
|
2022 H1
|
Organic Change 2
|
FX
|
2021 H1
|
Change
|
Organic Change 2
|
Underlying revenue
|
1,609
|
(164)
|
52
|
1,721
|
(7)%
|
(9)%
|
Underlying OE revenue
|
697
|
(42)
|
20
|
719
|
(3)%
|
(6)%
|
Underlying services revenue
|
912
|
(122)
|
32
|
1,002
|
(9)%
|
(12)%
|
Underlying gross profit
|
326
|
(77)
|
8
|
395
|
(17)%
|
(19)%
|
Gross margin %
|
20.3%
|
|
|
23.0%
|
(2.7)%pt
|
(2.5)%pt
|
Commercial and administrative costs
|
(86)
|
(6)
|
(1)
|
(79)
|
9%
|
8%
|
Research and development costs
|
(53)
|
(5)
|
(1)
|
(47)
|
13%
|
11%
|
Joint ventures and associates
|
2
|
2
|
−
|
−
|
−
|
−
|
Underlying operating profit
|
189
|
(86)
|
6
|
269
|
(30)%
|
(32)%
|
Underlying operating margin %
|
11.7%
|
|
|
15.6%
|
(3.9)%pt
|
(3.9)%pt
|
|
2022 H1
|
2021 H1
|
Change
|
Trading cash flow
|
89
|
89
|
−
|
Our Defence business continued to perform well, with the business cycle normalising in 2022 following two years of increased support from customers to offset COVID-19 challenges. We achieved our first milestone on the B-52 programme with the completion of a review in support of the F130 integration activities onto the airframe. The rapid twin pod test to validate our integrated design for the B-52 will commence in the coming months on our outdoor test stand at NASA's Stennis site in Mississippi.
Our Defence portfolio of long-cycle products is not immediately exposed to short term changes in defence demand, but the increase in military activity and spending this year has further underpinned the longer-term outlook for the business. We have seen continued impetus on key future programmes including Tempest, the new fighter jet programme which is targeting entry into service in 2035, and the next generation nuclear submarine programmes for the UK. We await the decision on the Future Long-Range Assault Aircraft (FLRAA) programme in the US, with the outcome expected in the coming months.
- Order intake was £1.4bn with a book-to-bill ratio of 0.9x. Our £6.5bn order book and the long operational life of our products give high visibility of future revenue. Order intake in the first half included a new 11-year contract to support the Adour engine, which powers the Hawk jet trainer aircraft.
- Underlying revenue decreased 9% to £1.6bn. Timing on the signature of the next tranche for the
F-35B and lower spare engine sales in Naval led to a 6% reduction in OE revenue. Services revenue was £122m (12%) lower partly due to the non-repeat of a large legacy spare parts sales in 2021. The remainder of the decline related to engine flying hours and delays from suppliers.
- Underlying gross profit of £326m was £77m (19%) lower than the prior period including the
non-recurrence of legacy spare parts sales in Defence, which had a £45m positive profit impact in the prior period. The 20.3% gross margin in 2022 H1 reflected a more normal mix of activity. Product margin remained strong through the period despite supply chain and labour inflationary challenges, and a £(22)m charge in respect of inflationary increases to the costs to deliver long term services contracts.
- Underlying operating profit was £189m, a decrease of 32% compared with 2021 H1 mostly due to the lower gross profit. Commercial and administrative costs increased by £6m. Research and development costs were up by £5m including investment in directed energy and future programmes. We are also playing a key role in Project Pele which will deliver the first advanced microreactor in the US.
- Trading cash flow at £89m was flat year on year. The increase in inventory reflected supply chain challenges and lower deliveries. This was offset by higher payables and a one-off customer receipt.
Outlook
We expect modest revenue growth in 2022, helped by an easier comparable in the second half of the year, with strong order book cover securing near term activity in all our end markets. We are increasing investment to support future growth and recent orders, develop products that will help decarbonise the military, and modernise our facilities. This, combined with a return to more usual levels of spare parts sales in 2022, is expected to result in a low double digit operating margin (new guidance) and strong cash conversion.
-
|
|
|
|
|
|
|
|
|
£ million
|
2022 H1
|
Organic Change 2
|
M&A 3
|
FX
|
2021 H1
|
Change
|
Organic Change 2
|
Underlying revenue
|
1,371
|
229
|
2
|
(41)
|
1,181
|
16%
|
20%
|
Underlying OE revenue
|
849
|
153
|
2
|
(24)
|
718
|
18%
|
21%
|
Underlying services revenue
|
522
|
76
|
−
|
(17)
|
463
|
13%
|
17%
|
Underlying gross profit
|
401
|
110
|
1
|
(11)
|
301
|
33%
|
37%
|
Gross margin %
|
29.2%
|
|
|
|
25.5%
|
3.7%pt
|
3.7%pt
|
Commercial and administrative costs
|
(204)
|
(19)
|
−
|
5
|
(190)
|
7%
|
10%
|
Research and development costs
|
(79)
|
(12)
|
−
|
2
|
(69)
|
14%
|
17%
|
Joint ventures and associates
|
1
|
1
|
−
|
1
|
(1)
|
|
|
Underlying operating profit
|
119
|
80
|
1
|
(3)
|
41
|
190%
|
195%
|
Underlying operating margin %
|
8.7%
|
|
|
|
3.5%
|
5.2%pt
|
5.1%pt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 H1
|
2021 H1
|
Change
|
Trading cash flow
|
(76)
|
71
|
(147)
|
Demand for our products remains very strong with continued record order intake in the first half. Demand has been strongest for power generation with orders including mission critical backup power for data centres for very large customers worldwide. Global supply chain challenges have continued to impact the availability of key components. This is restricting our pace of revenue recovery and drove a substantial increase in inventory in the first half which we aim to reduce in the second half. We have a dedicated taskforce in place to mitigate risk and accelerate OE deliveries with actions such as increased risk monitoring to identify and resolve supply chain issues early, and technical substitution of certain cast parts with 3D printed alternatives.
- Order intake of £2.1bn was 53% higher than the prior period and included our highest quarter for order intake on record. The book-to-bill ratio was 1.5x with strongest growth in demand in power generation governmental and industrial end markets. Our order cover for 2023 is building well and we are already at full capacity for 2023 in some market segments.
- Underlying revenue of £1.4bn was up 20%. Aftermarket services grew 17% with increased activity in both stationary and mobile solutions. OE revenue was up 21% with particularly strong sales in power generation, marine and governmental end markets.
- Underlying gross profit grew by 37% to £401m and gross margin increased by 3.7%pt. This reflected the mix of activity with an increase in higher margin services and lower warranty costs as well as improved utilisation in our manufacturing facilities compared with the prior period when we were in the earlier stages of recovery.
- Underlying operating profit was £119m, up £80m giving an operating margin of 8.7%. The increase in commercial and administrative costs reflected higher employee costs as activity increased as well as wage inflation pressures. The 17% increase in research and development costs reflects investment in new product development and transitioning products to sustainable fuel alternatives as we help our customers towards net-zero emissions.
- Trading cash outflow was £(76)m (2021 H1: £71m), with a negative cash conversion as inventory increased to meet growth demand and to manage the supply chain challenges. It also reflected our investment in a 54% non-controlling stake in electrolysis stack specialist Hoeller Electrolyzer.
Outlook
We expect good revenue growth in 2022 supported by record order intake, partly held back by the current global supply chain constraints. We expect our operating margin to be broadly flat, with higher activity levels utilisation offset by continued inflationary pressures and increased research and development in net zero solutions. Cash conversion is expected to improve in the second half with some of the recent inventory build unwinding, but is still expected to be lower for the full year.
£ million
|
2022 H1
|
Organic Change 2
|
FX
|
2021 H1
|
Change
|
Organic Change 2
|
Underlying revenue
|
1
|
−
|
(1)
|
2
|
(50)%
|
−
|
Underlying services revenue
|
1
|
−
|
(1)
|
2
|
(50)%
|
−
|
Underlying gross loss
|
(2)
|
(2)
|
−
|
−
|
−
|
−
|
Commercial and administrative costs
|
(9)
|
(9)
|
−
|
−
|
−
|
−
|
Research and development costs
|
(37)
|
(9)
|
−
|
(28)
|
32%
|
32%
|
Underlying operating loss
|
(48)
|
(20)
|
−
|
(28)
|
71%
|
71%
|
|
2022 H1
|
2021 H1
|
Change
|
Trading cash flow
|
(30)
|
(31)
|
1
|
New Markets is our reporting segment for investment phase businesses focused on addressing the opportunities being created by the transition to net zero and addressing the climate change challenge. This segment comprises two businesses with no significant revenues but high future potential: Rolls-Royce SMR and Rolls-Royce Electrical.
Our small modular reactor (SMR) design is going through the UK Generic Design Assessment (GDA) process, which is expected to take several years to complete. The estimated costs are mostly covered by third party investment and a UK Government grant in addition to £50m (approximately 10% of the total) self-funded by the Group. Factory sites where we will make the heavy vessel modules for our SMR are being identified in preparation for the build process, with minimal infrastructure investment prior to receipt of first order. We welcomed the decision by the European Parliament this year to categorise nuclear power as an environmentally sustainable energy source in the EU taxonomy for sustainable activities.
Our Electrical business supports electrical engineering projects across the Group enabling us to take an agile approach to specialist engineering resource. In the first half, we announced the development of turbogenerator technology which includes a new small engine designed for hybrid-electric applications in Civil Aerospace and Defence. In July we signed an agreement with Hyundai Motor Group to collaborate on bringing all-electric propulsion and hydrogen fuel cell technology to the advanced air mobility market. Our urban air mobility customers are targeting entry into service by 2026, using our torque dense, compact, and highly reliable electrical propulsion units.
- Underlying operating loss of £(48)m was £(20)m greater than the prior period comparative as we grew the workforce in both businesses with a focus on engineering capability for research and development activities. The rate of cost increase is slightly lower than expected as a result of a tight labour market in experienced engineers with certain skills and technical expertise.
- Trading cash flow of £(30)m was £18m better than operating losses mainly due to the receipt of third party funding and investment for the SMR programme.
Outlook
Investment in research and development will continue to increase in the second half of the year as we add to the engineering teams and take our new products through development and regulatory processes. Trading cash outflow guidance has been updated, and is now expected to be around two thirds of the underlying operating loss in 2022 (previously £100m better), with the difference mainly due to the phased receipt of secured third party equity investment in Rolls-Royce SMR.
Statutory income statement
£ million
|
2022 H1
|
2021 H1
|
Change
|
Revenue
|
5,600
|
5,159
|
441
|
Gross profit
|
1,062
|
814
|
248
|
Operating profit
|
223
|
38
|
185
|
Gain/(loss) on disposal/acquisition of businesses
|
77
|
(7)
|
84
|
Net financing (costs)/income
|
(2,054)
|
83
|
(2,137)
|
(Loss)/profit before taxation
|
(1,754)
|
114
|
(1,868)
|
Taxation
|
143
|
280
|
(137)
|
(Loss)/profit from continuing operations
|
(1,611)
|
394
|
(2,005)
|
(Loss)/earnings per share from continuing operations (pence)
|
(19.29)
|
4.73
|
(24.02)
|
The adjustments between the underlying income statement and the statutory income statement are set out in note 2 to the condensed consolidated interim financial statements.
Statutory revenue of £5.6bn was 9% higher than the prior period. Along with the improvements in underlying revenue, statutory revenue benefited from strengthening USD exchange rates.
Gross profit of £1.1bn was 30% higher than the prior period. Gross profit included a £219m LTSA catch-up in Civil Aerospace (2021 H1: £166m) and other movements which had a positive profit impact in the current period, partly offset by a lower contribution from Defence due to the non-repeat of legacy spare parts sales in the prior period. Gross profit also benefited from strengthening USD exchange rates.
Operating profit improved to £223m from £38m in the prior period. Research and development costs were 4% lower. Commercial and administrative costs increased on the prior period with strengthening USD exchange rates, non-repeat of furlough assistance received in 2021, increased activity as markets recover in Power Systems and Civil Aerospace and increased headcount in New Markets as we grow our SMR and Electrical businesses.
Loss before taxation of £(1.8)bn included £(2.1)bn of net financing costs, of which £(1.8)bn were
mark-to-market on derivative contracts and in year foreign exchange losses, and £(0.2)bn net interest payable. It also included a £76m gain on the disposal of AirTanker Holdings.
Loss from continuing operations of £(1.6)bn included a tax credit of £143m. The tax credit mainly relates to the increase in the UK deferred tax asset on unrealised foreign exchange losses on derivative contracts together with tax on profits and losses in overseas jurisdictions. The £280m credit in the prior period mostly related to movements in deferred tax balances due to the UK tax rate change from 19% to 25%, effective from April 2023.
£ million
|
30 Jun 2022
|
31 Dec 2021
|
Change
|
Intangible assets
|
4,054
|
4,041
|
13
|
Property, plant and equipment
|
3,899
|
3,917
|
(18)
|
Right-of-use assets
|
1,116
|
1,203
|
(87)
|
Joint ventures and associates
|
466
|
404
|
62
|
Contract assets and liabilities
|
(9,646)
|
(8,836)
|
(810)
|
Working capital 5
|
1,870
|
1,458
|
412
|
Provisions
|
(2,248)
|
(1,582)
|
(666)
|
Net debt 6
|
(5,126)
|
(5,110)
|
(16)
|
Net financial assets and liabilities 6
|
(4,003)
|
(3,034)
|
(969)
|
Net post-retirement scheme surpluses/(deficits)
|
48
|
(225)
|
273
|
Taxation
|
1,953
|
1,787
|
166
|
Held for sale
|
1,320
|
1,305
|
15
|
Other net assets and liabilities
|
36
|
36
|
−
|
Net liabilities
|
(6,261)
|
(4,636)
|
(1,625)
|
Other items
|
|
|
|
USD hedge book (USDbn)
|
21
|
22
|
(1)
|
Civil LTSA asset
|
928
|
915
|
13
|
Civil LTSA liability
|
(7,664)
|
(7,129)
|
(535)
|
Civil net LTSA liability
|
(6,736)
|
(6,214)
|
(522)
|
Key drivers of balance sheet movements are detailed below:
Contract assets and liabilities: The £(810)m movement in the net liability balance was mainly driven by Civil Aerospace LTSA revenue billed being ahead of revenue recognised in the period, together with foreign exchange movements. In addition, there was an increase in advance payments received in Defence.
Working capital: The £412m increase reflected a £780m increase in inventory driven by supply chain issues, delayed outputs and a ramp up in preparation for second half sales with the largest increases in Civil Aerospace and Power Systems with a more modest increase in Defence. A £610m increase in receivables reflected increased sales volumes and foreign exchange impacts. A £(978)m increase in payables reflected higher levels of purchases to support expected sales growth in future periods, as well as foreign exchange impacts due to the stronger USD.
Provisions: The £666m increase primarily reflected the adoption of the amendment to IAS 37 for Onerous Contracts - Cost of Fulfilling a Contract which increased contract loss provisions by £723m on 1 January 2022. The amendment clarifies that the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract and also an allocation of other costs that relate directly to fulfilling contracts.
Net debt: Remained broadly flat at £5.1bn.
Net financial assets and liabilities: £(969)m movement was primarily driven by the change in the fair value of foreign exchange contracts due to the impact of the movement in £:US$ exchange rates from £:$1.35 at
31 December 2021 to £:$1.21 at 30 June 2022.
Net post-retirement scheme surpluses: £273m movement primarily driven by an increase in discount rates on pension liabilities.
Taxation: The net tax asset increased by £166m, driven by £213m related to the increase in the deferred tax asset on unrealised losses on derivative contracts, which was partially offset by a reduction in net deferred tax assets on movements in post-retirement schemes (£85m).
|
|
£ million
|
2022 H1
|
2021 H1 8
|
Change
|
Underlying operating profit
|
125
|
307
|
(182)
|
Operating profit/(loss) from discontinued operations
|
68
|
(93)
|
161
|
Depreciation, amortisation and impairment
|
455
|
504
|
(49)
|
Lease payments (capital plus interest)
|
(114)
|
(171)
|
57
|
Expenditure on intangible assets
|
(82)
|
(71)
|
(11)
|
Capital expenditure (PPE)
|
(115)
|
(124)
|
9
|
Movement in inventory
|
(692)
|
(219)
|
(473)
|
Movement in receivables/payables/contract balances (excluding Civil LTSA)
|
423
|
(400)
|
823
|
Civil Aerospace net LTSA balance change
|
433
|
(108)
|
541
|
Movement in provisions
|
(116)
|
(136)
|
20
|
Cash flows on settlement of excess derivative contracts
|
(265)
|
(303)
|
38
|
Fees on undrawn facilities
|
(23)
|
(35)
|
12
|
Net interest received and paid
|
(114)
|
(81)
|
(33)
|
Cash flow on financial instruments net of realised losses included in operating profit
|
35
|
(52)
|
87
|
Other
|
(6)
|
27
|
(33)
|
Trading cash flow
|
12
|
(955)
|
967
|
…. Of which relates to continuing operations
|
21
|
(979)
|
1,000
|
Contributions to defined benefit pensions in excess of underlying charge
|
(1)
|
(94)
|
93
|
Taxation paid
|
(88)
|
(102)
|
14
|
Group free cash flow
|
(77)
|
(1,151)
|
1,074
|
…. Of which relates to continuing operations
|
(68)
|
(1,174)
|
1,106
|
Disposals and acquisitions
|
(18)
|
(22)
|
4
|
Exceptional Group restructuring
|
(48)
|
(134)
|
86
|
Payment of financial penalties
|
−
|
(156)
|
156
|
Excluding: settlement of excess derivative contracts
|
265
|
303
|
(38)
|
Excluding: capital expenditure (including investment from non-controlling interests and movement in investments)
|
213
|
223
|
(10)
|
Excluding: capital element of lease payments
|
95
|
147
|
(52)
|
Excluding: interest paid
|
172
|
150
|
22
|
Other
|
(5)
|
(39)
|
34
|
Net cash inflow/(outflow) from operating activities
|
597
|
(679)
|
1,276
|
Key changes in the funds flow items are described below:
Expenditure on intangible assets: expenditure of £(82)m in the period (2021 H1: £(71)m) included £(48)m capitalised research and development (2021 H1: £(41)m), which was modestly higher than the prior period reflecting the mix of spend across Civil Aerospace engine programmes.
Capital expenditure: investment of £(115)m was £9m lower than the prior period, largely reflecting reduced spend in Civil Aerospace, primarily due to timing impacts, partly offset by higher investment in Power Systems and in New Markets.
Increase in inventory: global supply chain constraints and parts supply shortages resulted in a £(692)m outflow as inventory increased in the first half, with the largest increases in Civil Aerospace and Power Systems. In Civil Aerospace work-in-progress inventory grew, as engine output delays more than offset the impact of lower incoming parts from suppliers, alongside a higher level of assembled engines held in inventory due partly to the timing of spare engine sales. Power Systems inventory also grew, with higher work-in-progress due to parts shortages as well as planned inventory build to support the expected increase in sales in the second half. There was a more modest increase in Defence.
Movement in receivables/payables/contract balances (excluding Civil LTSA): inflow of £423m in the period (2021 H1: £(400)m) driven mainly by Civil Aerospace including higher trade payables and joint venture payables due largely to timing at the end of 2021, as well as higher RRSP payables and warranties due to the recovery in flying hours in the first half and planned increase in shop visit volumes in the second half. Defence also saw an increase in contract liabilities in the period, reflecting advance payments and engine deposits.
Movement in Civil Aerospace net LTSA creditor: the £433m movement (2021 H1: £(108)m) reflected EFH invoiced receipts of £1,648m (2021 H1: £1,002m) offset by Civil Aerospace LTSA revenue in the income statement of £1,215m (2021 H1: £1,110m). The increase in EFH invoiced receipts reflected higher engine flying hours, recovery in customer invoicing of minimum utilisation clauses, and modest timing benefits, while the higher LTSA revenue was driven by £81m higher positive LTSA catch-ups year-on-year, and £24m due to modestly higher shop visit volumes.
Movement in provisions: the £(116)m movement (2021 H1: £(136)m) was largely in Civil Aerospace. It included a small net increase in the Trent 1000 provision reflecting delays in certification, more than offset by a reduction of contract loss provisions primarily due to a reversal reflecting a change in the discount rate due to higher inflation and interest rates. £143m of provisions were utilised in the period, mainly for warranty and guarantees, contract losses and Trent 1000 costs.
Cash flows on settlement of excess derivative contracts: relates to the cash settlement costs in the period for the offsetting foreign exchange contracts that were entered into to reduce the size of the US Dollar hedge book in 2020. The cash settlement costs of £1.7bn occur across 2020-2026, of which £0.8bn remains to be paid in future periods including £(61)m due to be settled in the second half.
Interest: the net payment of £(114)m in the year was higher than the prior period (2021 H1: (£(81)m), reflecting the full impact during the period of the drawdown of the £2bn UK Export Finance (UKEF) facility in June 2021.
Contributions to defined benefit pensions: cash contributions were broadly in line with the income statement charge in the first half. In the prior period cash contributions were £94m higher than the income statement charge, reflecting payment deferrals from 2020.
Notes to financial tables and commentary on pages 4-13:
1 Underlying performance excludes the impact of period end mark-to-market adjustments, the effect of acquisition accounting and business disposals, impairment of goodwill and other non-current and current assets, and exceptional items. Adjustments between the underlying income statement and the reported income statement are set out in note 2 in the condensed consolidated interim financial statements on page 32.
2 Organic change at constant translational currency (constant currency) applying FY21 average rates to 2021 and 2022, excluding M&A. All commentary is provided on an organic basis unless otherwise stated.
3 M&A includes 2021 Power Systems acquisitions comprising of Shanghai, Cooltech and joint venture Kowry and Other businesses 2021 disposals of Bergen Engines AS and Civil Nuclear Instrumentation & Controls.
4 Other businesses include the trading results of the Bergen Engines AS business until the date of disposal on 31 December 2021 and the results of the Civil Nuclear Instrumentation & Control business until the date of disposal on 5 November 2021. The trading results of the UK Civil Nuclear business have been included in Other businesses. The underlying results of Other businesses and Corporate and Inter-segment activities for 30 June 2021 have been restated to reclassify the results of the Group's SMR and electrical activities as New Markets.
5 Net working capital includes inventory, trade receivables and payables and similar assets and liabilities.
6 Net debt includes £102m (31 Dec 2021: £37m) of the fair value of derivatives included in fair value hedges and the element of fair value relating to exchange differences on the underlying principal of derivatives in cash flow hedges. Net debt has been adjusted to exclude net debt held for sale.
7 The derivation of the summary funds flow statement above from the reported cash flow from operating activities is included on page 53.
8 The comparative information for the period ended 30 June 2021 has been re-presented to be on a comparable basis with the definition of underlying results. There is no change to trading or group free cash flow.
A reconciliation of alternative performance measures to their statutory equivalent is provided on pages 52 and 53.
Condensed consolidated interim financial statements
Condensed consolidated income statement
For the half-year ended 30 June 2022
|
|
|
|
|
|
|
|
Half-year to 30 June 2022
|
Half-year to
30 June 2021
|
|
|
|
Notes
|
£m
|
£m
|
|
Continuing operations
|
|
|
|
|
|
|
Revenue
|
|
|
2
|
5,600
|
5,159
|
|
Cost of sales 1
|
|
|
|
(4,538)
|
(4,345)
|
|
Gross profit
|
|
|
2
|
1,062
|
814
|
|
Commercial and administrative costs
|
|
|
2
|
(514)
|
(424)
|
|
Research and development costs
|
|
|
2, 3
|
(373)
|
(390)
|
|
Share of results of joint ventures and associates
|
|
|
|
48
|
38
|
|
Operating profit
|
|
|
|
223
|
38
|
|
Gain/(loss) arising on acquisition and disposal of businesses
|
|
|
19
|
77
|
(7)
|
|
Profit before financing and taxation
|
|
|
|
300
|
31
|
|
|
|
|
|
|
|
|
Financing income 2
|
|
|
4
|
215
|
280
|
|
Financing costs 2
|
|
|
4
|
(2,269)
|
(197)
|
|
Net financing (costs)/income
|
|
|
|
(2,054)
|
83
|
|
|
|
|
|
|
|
|
(Loss)/profit before taxation
|
|
|
|
(1,754)
|
114
|
|
Taxation
|
|
|
5
|
143
|
280
|
|
(Loss)/profit for the period from continuing operations
|
|
|
|
(1,611)
|
394
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
Profit for the period
|
|
|
|
60
|
16
|
|
Costs of disposal of discontinued operations
|
|
|
|
(4)
|
(17)
|
|
Profit/(loss) for the period from discontinued operations
|
|
|
19
|
56
|
(1)
|
|
|
|
|
|
|
|
|
(Loss)/profit for the period
|
|
|
|
(1,555)
|
393
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
Ordinary shareholders
|
|
|
|
(1,554)
|
393
|
|
Non-controlling interests (NCI)
|
|
|
|
(1)
|
−
|
|
(Loss)/profit for the period
|
|
|
|
(1,555)
|
393
|
|
Other comprehensive income/(expense)
|
|
|
|
610
|
(145)
|
|
Total comprehensive (expense)/income for the period
|
|
|
|
(945)
|
248
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/earnings per ordinary share attributable to ordinary shareholders:
|
|
|
6
|
|
|
|
From continuing operations:
|
|
|
|
|
|
|
Basic
|
|
|
|
(19.29)p
|
4.73p
|
|
Diluted
|
|
|
|
(19.29)p
|
4.72p
|
|
|
|
|
|
|
|
|
From continuing and discontinued operations:
|
|
|
|
|
|
|
Basic
|
|
|
|
(18.62)p
|
4.72p
|
|
Diluted
|
|
|
|
(18.62)p
|
4.71p
|
|
Underlying earnings per ordinary share are shown in note 6.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Cost of sales includes a charge for expected credit losses of £28m (30 June 2021: £48m). Further details can be found in note 10.
2 Included within financing are fair value changes on derivative contracts. Further details can be found in notes 2, 4 and 12.
Condensed consolidated statement of comprehensive income
For the half-year ended 30 June 2022
|
|
Half-year to 30 June 2022
|
Half-year to
30 June 2021
|
|
Notes
|
£m
|
£m
|
(Loss)/profit for the period
|
|
(1,555)
|
393
|
Other comprehensive income/(expense) (OCI)
|
|
|
|
Actuarial movements in post-retirement schemes
|
16
|
329
|
(12)
|
Revaluation to fair value of other investments
|
|
(5)
|
−
|
Share of OCI of joint ventures and associates
|
|
1
|
(4)
|
Related tax movements
|
|
(85)
|
16
|
Items that will not be reclassified to profit or loss
|
|
240
|
−
|
|
|
|
|
Foreign exchange translation differences on foreign operations
|
|
375
|
(174)
|
Cash flow hedge reserve reclassified to income statement on disposal of businesses
|
19
|
62
|
−
|
Movement on fair values debited to cash flow hedge reserve
|
|
8
|
(41)
|
Reclassified to income statement from cash flow hedge reserve
|
|
(88)
|
38
|
Costs of hedging
|
|
4
|
−
|
Share of OCI of joint ventures and associates
|
|
−
|
32
|
Related tax movements
|
|
9
|
−
|
Items that will be reclassified to profit or loss
|
|
370
|
(145)
|
|
|
|
|
Total other comprehensive income/(expense)
|
|
610
|
(145)
|
|
|
|
|
Total comprehensive (expense)/income for the period
|
|
(945)
|
248
|
|
|
|
|
Attributable to:
|
|
|
|
Ordinary shareholders
|
|
(944)
|
248
|
Non-controlling interests
|
|
(1)
|
−
|
Total comprehensive (expense)/income for the period
|
|
(945)
|
248
|
|
|
|
|
Total comprehensive (expense)/income for the period attributable to ordinary shareholders arises from:
|
|
|
|
Continuing operations
|
|
(1,001)
|
316
|
Discontinued operations
|
|
57
|
(68)
|
Total comprehensive (expense)/income for the period attributable to ordinary shareholders
|
|
(944)
|
248
|
Condensed consolidated balance sheet
At 30 June 2022
|
|
30 June
2022
|
31 December 2021
|
|
Notes
|
£m
|
£m
|
ASSETS
|
|
|
|
Intangible assets
|
7
|
4,054
|
4,041
|
Property, plant and equipment
|
8
|
3,899
|
3,917
|
Right-of-use assets
|
9
|
1,116
|
1,203
|
Investments - joint ventures and associates
|
|
466
|
404
|
Investments - other
|
|
36
|
36
|
Other financial assets
|
12
|
433
|
361
|
Deferred tax assets
|
|
2,433
|
2,249
|
Post-retirement scheme surpluses
|
16
|
1,157
|
1,148
|
Non-current assets
|
|
13,594
|
13,359
|
Inventories
|
|
4,446
|
3,666
|
Trade receivables and other assets
|
10
|
5,993
|
5,383
|
Contract assets
|
11
|
1,498
|
1,473
|
Taxation recoverable
|
|
97
|
90
|
Other financial assets
|
12
|
136
|
46
|
Short-term investments
|
|
1
|
8
|
Cash and cash equivalents
|
|
2,747
|
2,621
|
Current assets
|
|
14,918
|
13,287
|
Assets held for sale
|
19
|
2,101
|
2,028
|
TOTAL ASSETS
|
|
30,613
|
28,674
|
|
|
|
|
LIABILITIES
|
|
|
|
Borrowings and lease liabilities
|
13
|
(321)
|
(279)
|
Other financial liabilities
|
12
|
(992)
|
(689)
|
Trade payables and other liabilities
|
14
|
(6,681)
|
(6,016)
|
Contract liabilities
|
11
|
(4,214)
|
(3,599)
|
Current tax liabilities
|
|
(113)
|
(101)
|
Provisions for liabilities and charges
|
15
|
(567)
|
(475)
|
Current liabilities
|
|
(12,888)
|
(11,159)
|
Borrowings and lease liabilities
|
13
|
(7,655)
|
(7,497)
|
Other financial liabilities
|
12
|
(3,478)
|
(2,715)
|
Trade payables and other liabilities
|
14
|
(1,888)
|
(1,575)
|
Contract liabilities
|
11
|
(6,930)
|
(6,710)
|
Deferred tax liabilities
|
|
(464)
|
(451)
|
Provisions for liabilities and charges
|
15
|
(1,681)
|
(1,107)
|
Post-retirement scheme deficits
|
16
|
(1,109)
|
(1,373)
|
Non-current liabilities
|
|
(23,205)
|
(21,428)
|
Liabilities associated with assets held for sale
|
19
|
(781)
|
(723)
|
TOTAL LIABILITIES
|
|
(36,874)
|
(33,310)
|
|
|
|
|
NET LIABILITIES
|
|
(6,261)
|
(4,636)
|
|
|
|
|
EQUITY
|
|
|
|
Called-up share capital
|
|
1,674
|
1,674
|
Share premium
|
|
1,012
|
1,012
|
Capital redemption reserve
|
|
166
|
165
|
Hedging reserves
|
|
(50)
|
(45)
|
Merger reserve
|
|
650
|
650
|
Translation reserve
|
|
717
|
342
|
Accumulated losses
|
|
(10,460)
|
(8,460)
|
Equity attributable to ordinary shareholders
|
|
(6,291)
|
(4,662)
|
Non-controlling interests
|
|
30
|
26
|
TOTAL EQUITY
|
|
(6,261)
|
(4,636)
|
Condensed consolidated cash flow statement
For the half-year ended 30 June 2022
|
Notes
|
Half-year to 30 June 2022
£m
|
Half-year to
30 June 2021
£m
|
Reconciliation of cash flows from operating activities
|
|
|
|
Operating profit from continuing operations
|
|
223
|
38
|
Operating profit/(loss) from discontinued operations
|
19
|
68
|
(93)
|
Operating profit/(loss)
|
|
291
|
(55)
|
Loss on disposal of property, plant and equipment
|
|
16
|
2
|
Share of results of joint ventures and associates
|
|
(48)
|
(38)
|
Dividends received from joint ventures and associates
|
|
19
|
14
|
Amortisation and impairment of intangible assets
|
7
|
138
|
159
|
Depreciation and impairment of property, plant and equipment
|
8
|
203
|
243
|
Depreciation and impairment of right-of-use assets
|
9
|
127
|
128
|
Adjustment of amounts payable under residual value guarantees within lease liabilities 1
|
|
(1)
|
(3)
|
Impairment of and other movements on investments
|
|
−
|
2
|
Decrease in provisions
|
|
(94)
|
(211)
|
Increase in inventories
|
|
(692)
|
(219)
|
Movement in trade receivables/payables and other assets/liabilities
|
|
183
|
(136)
|
Movement in contract assets/liabilities
|
|
682
|
(178)
|
Financial penalties paid 2
|
|
−
|
(156)
|
Cash flows on other financial assets and liabilities held for operating purposes
|
|
(167)
|
(45)
|
Interest received
|
|
6
|
3
|
Net defined benefit post-retirement cost recognised in profit before financing
|
16
|
27
|
26
|
Cash funding of defined benefit post-retirement schemes
|
16
|
(29)
|
(131)
|
Share-based payments
|
|
24
|
18
|
Net cash inflow/(outflow) from operating activities before taxation
|
|
685
|
(577)
|
Taxation paid
|
|
(88)
|
(102)
|
Net cash inflow/(outflow) from operating activities
|
|
597
|
(679)
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Net movement in other investments
|
|
(5)
|
(6)
|
Additions of intangible assets
|
|
(94)
|
(89)
|
Disposals of intangible assets
|
7
|
5
|
2
|
Purchases of property, plant and equipment
|
|
(125)
|
(126)
|
Disposals of property, plant and equipment
|
|
25
|
5
|
Disposal of businesses
|
19
|
179
|
(8)
|
Movement in investments in joint ventures and associates and other movements on investments
|
|
(14)
|
(2)
|
Movement in short-term investments
|
|
7
|
(1)
|
Net cash outflow from investing activities
|
|
(22)
|
(225)
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
Repayment of loans
|
|
(23)
|
(942)
|
Proceeds from increase in loans
|
|
1
|
2,003
|
Capital element of lease payments
|
|
(95)
|
(147)
|
Net cash flow from (decrease)/increase in borrowings and leases
|
|
(117)
|
914
|
Interest paid
|
|
(120)
|
(84)
|
Interest element of lease payments
|
|
(29)
|
(31)
|
Fees paid on undrawn facilities
|
|
(23)
|
(35)
|
Cash flows on settlement of excess derivative contracts 3
|
4
|
(265)
|
(303)
|
Transactions with NCI 4
|
|
25
|
−
|
NCI on formation of subsidiary
|
|
−
|
2
|
Redemption of C Shares
|
|
(1)
|
(2)
|
Net cash (outflow)/inflow from financing activities
|
|
(530)
|
461
|
|
|
|
|
Change in cash and cash equivalents
|
|
45
|
(443)
|
Cash and cash equivalents at 1 January
|
|
2,639
|
3,496
|
Exchange gains/(losses) on cash and cash equivalents
|
|
98
|
(75)
|
Cash and cash equivalents at 30 June 5
|
|
2,782
|
2,978
|
Condensed consolidated cash flow statement continued
For the half-year ended 30 June 2022
1 Where the cost of meeting residual value guarantees is less than that previously estimated, as costs have been mitigated or liabilities waived by the lessor, the lease liability has been remeasured. To the extent that the value of this remeasurement exceeds the value of the right-of-use asset, the reduction in the lease liability is credited to cost of sales.
2 Relates to penalties paid on agreements with investigating bodies.
3 During the period, the Group incurred a cash outflow of £265m as a result of settling foreign exchange contracts that were originally in place to sell $1,600m receipts. Further detail is provided in note 4.
4 Relates to NCI investment received in the period, in respect of Rolls-Royce SMR Limited.
5 The Group considers overdrafts (repayable on demand) and cash held for sale to be an integral part of its cash management activities and these are included in cash and cash equivalents for the purposes of the cash flow statement.
In deriving the condensed consolidated cash flow statement, movements in balance sheet line items have been adjusted for non-cash items. The cash flow in the period includes the sale of goods and services to joint ventures and associates.
|
Half-year to 30 June 2022
£m
|
Half-year to
30 June 2021
£m
|
Reconciliation of movements in cash and cash equivalents to movements in net debt
|
|
|
Change in cash and cash equivalents
|
45
|
(443)
|
Cash flow from decrease/(increase) in borrowings and leases
|
117
|
(914)
|
Less: settlement of related derivatives included in fair value of swaps below
|
−
|
6
|
Cash flow from (decrease)/increase in short-term investments
|
(7)
|
1
|
Change in net debt resulting from cash flows
|
155
|
(1,350)
|
New leases and other non-cash adjustments to lease liabilities and borrowings
|
(67)
|
(17)
|
Exchange (losses)/gains on net debt
|
(162)
|
2
|
Fair value adjustments
|
24
|
144
|
Reclassifications
|
−
|
19
|
Movement in net debt
|
(50)
|
(1,202)
|
Net debt at 1 January
|
(5,194)
|
(3,827)
|
Net debt at 30 June excluding the fair value of swaps
|
(5,244)
|
(5,029)
|
Fair value of swaps hedging fixed rate borrowings
|
102
|
57
|
Net debt at 30 June
|
(5,142)
|
(4,972)
|
Condensed consolidated cash flow statement continued
For the half-year ended 30 June 2022
The movement in net debt (defined by the Group as including the items shown below) is as follows:
|
At 1 January
|
Funds flow
|
Exchange differences
|
Fair value adjustments
|
Reclassifi-cations 1
|
Other movements
|
At 30 June
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
2022
|
|
|
|
|
|
|
|
Cash at bank and in hand
|
795
|
182
|
29
|
−
|
−
|
−
|
1,006
|
Money market funds
|
49
|
174
|
−
|
−
|
−
|
−
|
223
|
Short-term deposits
|
1,777
|
(327)
|
68
|
−
|
−
|
−
|
1,518
|
Cash and cash equivalents (per balance sheet)
|
2,621
|
29
|
97
|
−
|
−
|
−
|
2,747
|
Cash and cash equivalents included within assets held for sale
|
25
|
11
|
1
|
−
|
−
|
−
|
37
|
Overdrafts
|
(7)
|
5
|
−
|
−
|
−
|
−
|
(2)
|
Cash and cash equivalents
(per cash flow statement)
|
2,639
|
45
|
98
|
−
|
−
|
−
|
2,782
|
Short-term investments
|
8
|
(7)
|
−
|
−
|
−
|
−
|
1
|
Other current borrowings
|
(2)
|
1
|
−
|
−
|
−
|
−
|
(1)
|
Non-current borrowings
|
(6,023)
|
−
|
(98)
|
25
|
−
|
(23)
|
(6,119)
|
Borrowings included within liabilities held for sale
|
(59)
|
21
|
(1)
|
(1)
|
−
|
−
|
(40)
|
Lease liabilities
|
(1,744)
|
91
|
(157)
|
−
|
−
|
(44)
|
(1,854)
|
Lease liabilities included within liabilities held for sale
|
(13)
|
4
|
(4)
|
−
|
−
|
−
|
(13)
|
Financial liabilities
|
(7,841)
|
117
|
(260)
|
24
|
−
|
(67)
|
(8,027)
|
Net debt excluding fair value of swaps
|
(5,194)
|
155
|
(162)
|
24
|
−
|
(67)
|
(5,244)
|
Fair value of swaps hedging fixed rate borrowings 2
|
37
|
−
|
98
|
(33)
|
−
|
−
|
102
|
Net debt 3
|
(5,157)
|
155
|
(64)
|
(9)
|
−
|
(67)
|
(5,142)
|
|
|
|
|
|
|
|
|
2021
|
|
|
|
|
|
|
|
Cash at bank and in hand
|
940
|
(122)
|
(13)
|
−
|
(38)
|
−
|
767
|
Money market funds
|
669
|
(527)
|
−
|
−
|
−
|
−
|
142
|
Short-term deposits
|
1,843
|
221
|
(58)
|
−
|
−
|
−
|
2,006
|
Cash and cash equivalents (per balance sheet)
|
3,452
|
(428)
|
(71)
|
−
|
(38)
|
−
|
2,915
|
Cash and cash equivalents included within assets held for sale
|
51
|
(16)
|
(4)
|
−
|
38
|
−
|
69
|
Overdrafts
|
(7)
|
1
|
−
|
−
|
-
|
−
|
(6)
|
Cash and cash equivalents
(per cash flow statement)
|
3,496
|
(443)
|
(75)
|
−
|
-
|
−
|
2,978
|
Short-term investments
|
−
|
1
|
−
|
−
|
-
|
−
|
1
|
Other current borrowings
|
(1,006)
|
948
|
1
|
36
|
18
|
−
|
(3)
|
Non-current borrowings
|
(4,274)
|
(2,003)
|
45
|
108
|
88
|
(3)
|
(6,039)
|
Borrowings included within liabilities held for sale
|
−
|
−
|
−
|
−
|
(77)
|
−
|
(77)
|
Lease liabilities
|
(2,043)
|
145
|
31
|
−
|
15
|
(14)
|
(1,866)
|
Lease liabilities included within liabilities held for sale
|
−
|
2
|
−
|
−
|
(25)
|
−
|
(23)
|
Financial liabilities
|
(7,323)
|
(908)
|
77
|
144
|
19
|
(17)
|
(8,008)
|
Net debt excluding fair value of swaps
|
(3,827)
|
(1,350)
|
2
|
144
|
19
|
(17)
|
(5,029)
|
Fair value of swaps hedging fixed rate borrowings 2
|
251
|
(6)
|
(41)
|
(147)
|
−
|
−
|
57
|
Net debt 3
|
(3,576)
|
(1,356)
|
(39)
|
(3)
|
19
|
(17)
|
(4,972)
|
1 Reclassifications during the period to 30 June 2021 included the transfer of ITP Aero to held for sale and fees of £29m paid in previous periods for the £2,000m loan (supported by an 80% guarantee from UK Export Finance) that have been reclassified to borrowings on the draw down of the facility during the prior period.
2 Fair value of swaps hedging fixed rate borrowings reflects the impact of derivatives on repayments of the principal amount of debt. Net debt therefore includes the fair value of derivatives included in fair value hedges (30 June 2022: £81m, 31 December 2021: £114m) and the element of fair value relating to exchange differences on the underlying principal of derivatives in cash flow hedges (30 June 2022: £21m, 31 December 2021: £(77)m).
3 As at 30 June 2022, net debt excluding lease liabilities was £(3,275)m (31 December 2021: £(3,400)m).
Condensed consolidated statement of changes in equity
For the half-year ended 30 June 2022
|
|
Attributable to ordinary shareholders
|
|
|
|
Notes
|
Called-up
share capital
|
Share premium
|
Capital redemption reserve
|
Hedging reserves 1
|
Merger reserve
|
Translation reserve
|
Accumulated losses 2
|
Total
|
Non-controlling interests (NCI)
|
Total equity
|
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
At 31 December 2021 as previously reported
|
|
1,674
|
1,012
|
165
|
(45)
|
650
|
342
|
(8,460)
|
(4,662)
|
26
|
(4,636)
|
|
Adoption of amendment to IAS 37 (post-tax)
|
1
|
-
|
-
|
-
|
-
|
-
|
-
|
(729)
|
(729)
|
-
|
(729)
|
|
At 1 January 2022
|
|
1,674
|
1,012
|
165
|
(45)
|
650
|
342
|
(9,189)
|
(5,391)
|
26
|
(5,365)
|
|
Loss for the period
|
|
−
|
−
|
−
|
−
|
−
|
−
|
(1,554)
|
(1,554)
|
(1)
|
(1,555)
|
|
Foreign exchange translation differences on foreign operations
|
|
−
|
−
|
−
|
−
|
−
|
375
|
−
|
375
|
−
|
375
|
|
Cash flow hedge reserve reclassified to income statement on disposal of businesses
|
19
|
−
|
−
|
−
|
62
|
−
|
−
|
−
|
62
|
−
|
62
|
|
Movement on post-retirement schemes
|
16
|
−
|
−
|
−
|
−
|
−
|
−
|
329
|
329
|
−
|
329
|
|
Fair value movement on cash flow hedges
|
|
−
|
−
|
−
|
8
|
−
|
−
|
−
|
8
|
−
|
8
|
|
Reclassified to income statement from cash flow hedge reserve
|
|
−
|
−
|
−
|
(88)
|
−
|
−
|
−
|
(88)
|
−
|
(88)
|
|
Costs of hedging
|
12
|
−
|
−
|
−
|
4
|
−
|
−
|
−
|
4
|
−
|
4
|
|
Revaluation to fair value of other investments
|
|
−
|
−
|
−
|
−
|
−
|
−
|
(5)
|
(5)
|
−
|
(5)
|
|
OCI of joint ventures and associates
|
|
−
|
−
|
−
|
−
|
−
|
−
|
1
|
1
|
−
|
1
|
|
Related tax movements
|
|
−
|
−
|
−
|
9
|
−
|
−
|
(85)
|
(76)
|
−
|
(76)
|
|
Total comprehensive expense for the period
|
|
−
|
−
|
−
|
(5)
|
−
|
375
|
(1,314)
|
(944)
|
(1)
|
(945)
|
|
Redemption of C Shares 3
|
|
−
|
−
|
1
|
−
|
−
|
−
|
(1)
|
−
|
−
|
−
|
|
Share-based payments - direct to equity 4
|
|
−
|
−
|
−
|
−
|
−
|
−
|
24
|
24
|
−
|
24
|
|
Transactions with NCI 5
|
|
−
|
−
|
−
|
−
|
−
|
−
|
20
|
20
|
5
|
25
|
|
Other changes in equity in the period
|
|
−
|
−
|
1
|
−
|
−
|
−
|
43
|
44
|
5
|
49
|
|
At 30 June 2022
|
|
1,674
|
1,012
|
166
|
(50)
|
650
|
717
|
(10,460)
|
(6,291)
|
30
|
(6,261)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2021
|
|
1,674
|
1,012
|
162
|
(94)
|
650
|
524
|
(8,825)
|
(4,897)
|
22
|
(4,875)
|
|
Profit for the period
|
|
-
|
-
|
-
|
-
|
-
|
-
|
393
|
393
|
-
|
393
|
|
Foreign exchange translation differences on foreign operations
|
|
-
|
-
|
-
|
-
|
-
|
(174)
|
-
|
(174)
|
-
|
(174)
|
|
Movement on post-retirement schemes
|
16
|
-
|
-
|
-
|
-
|
-
|
-
|
(12)
|
(12)
|
-
|
(12)
|
|
Fair value movement on cash flow hedges
|
|
-
|
-
|
-
|
(41)
|
-
|
-
|
-
|
(41)
|
-
|
(41)
|
|
Reclassified to income statement from cash flow hedge reserve
|
|
-
|
-
|
-
|
38
|
-
|
-
|
-
|
38
|
-
|
38
|
|
OCI of joint ventures and associates
|
|
-
|
-
|
-
|
32
|
-
|
-
|
(4)
|
28
|
-
|
28
|
|
Related tax movements
|
|
-
|
-
|
-
|
2
|
-
|
(2)
|
16
|
16
|
-
|
16
|
|
Total comprehensive income for the period
|
|
-
|
-
|
-
|
31
|
-
|
(176)
|
393
|
248
|
-
|
248
|
|
Redemption of C Shares 3
|
|
-
|
-
|
2
|
-
|
-
|
-
|
(2)
|
-
|
-
|
-
|
|
Share-based payments - direct to equity 4
|
|
-
|
-
|
-
|
-
|
-
|
-
|
18
|
18
|
-
|
18
|
|
NCI on formation of subsidiary
|
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
2
|
2
|
|
Related tax movements
|
|
-
|
-
|
-
|
-
|
-
|
-
|
17
|
17
|
-
|
17
|
|
Other changes in equity in the period
|
|
-
|
-
|
2
|
-
|
-
|
-
|
33
|
35
|
2
|
37
|
|
At 30 June 2021
|
|
1,674
|
1,012
|
164
|
(63)
|
650
|
348
|
(8,399)
|
(4,614)
|
24
|
(4,590)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 The hedging reserves include the cash flow hedge reserve of £(54)m and the costs of hedging reserve of £4m. See note 12.
2 At 30 June 2022, 16,297,976 ordinary shares with a net book value of £39m (30 June 2021: 34,938,153 ordinary shares with a net book value of £78m) were held for the purpose of share-based payment plans and included in accumulated losses. During the period:
- 13,332,079 ordinary shares with a net book value of £27m (30 June 2021: 4,928,564 ordinary shares with a net book value of £11m) vested in share-based payment plans; and
- the Company acquired none (30 June 2021: none) of its ordinary shares via reinvestment of dividends received on its own shares and purchased none (30 June 2021: none) of its ordinary shares through purchases on the London Stock Exchange.
3 In Rolls-Royce Holdings plc's own financial statements, C Shares are issued from the merger reserve. This reserve was created by a scheme of arrangement in 2011. As this reserve is eliminated on consolidation in the consolidated financial statements, the C Shares are shown as being issued from the capital redemption reserve.
4 Share-based payments - direct to equity is the share-based payment charge for the period less the actual cost of vesting excluding those vesting from own shares and cash received on share-based schemes vesting.
5 Relates to NCI investment received in the period in respect of Rolls-Royce SMR Limited.
Notes to the interim financial statements
1 Basis of preparation and accounting policies
Reporting entity
Rolls-Royce Holdings plc (the 'Company') is a public company limited by shares incorporated under the Companies Act 2006 and domiciled in the UK. These condensed consolidated interim financial statements of the Company as at and for the six months to 30 June 2022 consist of the consolidation of the financial statements of the Company and its subsidiaries (together referred to as the 'Group') and include the Group's interest in jointly controlled and associated entities.
The consolidated financial statements of the Group as at and for the year ended 31 December 2021 (2021 Annual Report) are available upon request from the Company Secretary, Rolls-Royce Holdings plc, Kings Place, 90 York Way, London, N1 9FX.
The Board of Directors approved the condensed consolidated financial statements on 4 August 2022.
Statement of compliance
These condensed consolidated financial statements have been prepared on the basis of the policies set out in the 2021 Annual Report, except for changes below, and in accordance with UK adopted IAS 34 Interim Financial Reporting and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority. They do not include all of the information required for full annual statements and should be read in conjunction with the Annual Report 2021.
The interim figures up to 30 June 2022 and 2021 are unaudited. The 2021 financial statements, which were prepared in accordance with UK adopted International Accounting Standards (IAS) and interpretations issued by the IFRS interpretations Committee applicable to companies reporting under UK adopted IAS, have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Changes to accounting policies
IAS 37 Provisions, contingent liabilities and contingent assets
The Group adopted the amendment to IAS 37 for Onerous Contracts - Cost of Fulfilling a Contract on 1 January 2022. The amendment clarifies the meaning of 'costs to fulfil a contract', explaining that the direct cost of fulfilling a contract comprises the incremental costs of fulfilling that contract (for example, direct labour and materials) and also an allocation of other costs that relate directly to fulfilling contracts. As a result of the amendment, the Group now includes additional allocated costs when determining whether a contract is onerous and in the quantification of the provision recognised in the event of a contract being onerous. These primarily relate to (a) fixed overheads in our operational areas that are incurred irrespective of manufacturing load, (b) fixed overheads of providing services including engine health monitoring and IT costs, and (c) depreciation of spare engines that the Group owns that are used to support the delivery of our contractual commitments to customers under LTSAs.
The Group has assessed the impact of this amendment on its contracts and has included additional allocated costs that have increased the total contract loss provision by £723m as at 1 January 2022 (see note 15). All material elements impact Civil Aerospace contracts. Of this increase, £38m relates to current provisions and £685m to non-current provisions. A tax credit has not been recognised on the increase in the provision relating to the UK (see Note 5 for details).
As required by the transition arrangement in relation to the amendment, comparative information has not been restated. The cumulative effect of initially applying the amendment has been recognised as an adjustment to the opening balance of retained earnings as at 1 January 2022.
Revision to IFRS not applicable in 2022
IFRS 17 Insurance Contracts
IFRS 17 is effective from 1 January 2023. The new standard established the principles for the recognition, measurement, presentation and disclosure of insurance contracts within the scope of the Standard. The objective of IFRS 17 is to ensure that an entity provides relevant information that faithfully represents those contracts.
The Group has performed an assessment to establish where an impact is expected and, at this time, the Group believes that the impact is restricted to its captive insurance company. The process of assessing the financial impact on the condensed consolidated financial statements will continue during the second half of 2022.
Other
IBOR reform transition
A number of the Group's lease liabilities are based on a LIBOR index. These are predominantly referencing USD LIBOR, which is not expected to cease until 2023, hence the change in relation to these contracts has not impacted the 2022 financial statements.
Post balance sheet events
On 3 August 2022, the Group announced that the Spanish government has approved the sale of ITP Aero to a consortium of investors led by Bain Capital Private Equity. As a result, the completion of the transaction is expected in the coming weeks.
1 Basis of preparation and accounting policies continued
Going concern
In assessing the adoption of the going concern basis in the condensed consolidated interim financial statements, the Directors have considered the Group's forecast cash flows and available liquidity over an 18-month period to February 2024, taking into account certain risks and uncertainties, including having regard to the Group's net liabilities of £6,261m.
Liquidity and borrowings
At 30 June 2022, the Group had liquidity of £7.3bn including cash and cash equivalents of £2.8bn (including £37m of cash included in Assets Held for Sale) and undrawn facilities of £4.5bn.
The Group's committed borrowing facilities at 30 June 2022 and 28 February 2024 are set out below. None of the facilities are subject to any financial covenants or rating triggers which could accelerate repayment.
(£m)
|
30 June 2022
|
28 February 2024
|
Issued Bond Notes 1
|
3,995
|
3,995
|
Other loans
|
44
|
−
|
UKEF £2bn loan 2
|
2,000
|
2,000
|
UKEF £1bn loan (undrawn) 3
|
1,000
|
1,000
|
Revolving Credit Facility (undrawn) 4
|
2,500
|
2,500
|
Bank Loan Facility (undrawn) 5
|
1,000
|
−
|
Total committed borrowing facilities
|
10,539
|
9,495
|
1 The value of Issued Bond Notes reflects the impact of derivatives on repayments of the principal amount of debt. The bonds mature by May 2028.
2 The £2,000m UKEF loan matures in August 2025.
3 The £1,000m UKEF loan matures in March 2026 (currently undrawn).
4 The £2,500m Revolving Credit Facility matures in March 2025 (currently undrawn).
5 The £1,000m Bank Loan Facility matures in January 2024 (currently undrawn).
Taking into account the maturity of borrowing facilities, the Group has committed facilities of at least £9.5bn available throughout the period to 28 February 2024.
Forecasts
The Group has modelled two forecasts in its assessment of going concern which have been considered by the Directors. The base case forecast reflects a best estimation of future trading. A stressed downside forecast has also been modelled.
The Group's base case forecast reflects the relaxation of travel restrictions and an ongoing increase in customer confidence coming out of the COVID-19 pandemic. This drives a steady recovery of trading, especially in the civil aviation industry. The modelling assumes Civil large engine EFHs recover to pre-pandemic levels during 2024.
The proceeds from the planned disposal of ITP Aero have been included in the base case forecast, together with an assumption that these proceeds would be used to repay debt facilities, although there is no formal or contractual commitment to do so.
The stressed downside forecast assumes no further recovery in Civil large engines, with EFHs modelled at average Q2 2022 levels over the 18-month going concern period. The stressed downside forecast also reflects additional near-term cost inflationary risk, load reduction through our factories, and possible supply chain challenges.
Conclusion
After reviewing the current liquidity position, the cash flow forecasts modelled under both the base case and stressed downside taking into account potential risks and uncertainties, the Directors consider that the Group has sufficient liquidity to continue in operational existence for a period of at least 18-months from the date of this report. The Directors are therefore satisfied that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements.
1 Basis of preparation and accounting policies continued
Climate change
In preparing the condensed consolidated interim financial statements, the Directors have continued to consider the impact of climate change, particularly in the context of the disclosures made in the Strategic Report in the 2021 Annual Report and the stated net zero targets. These considerations did not have a material impact on the financial reporting judgements and estimates, consistent with the assessment that climate change is not expected to have a significant impact on the Group's going concern assessment to February 2024 nor the viability of the Group over the next five years. The following specific points were considered:
- The Group continues to invest in new technologies including hybrid electric solutions in Power Systems, continued development of the more efficient UltraFan aero engine, testing of sustainable aviation fuels, small modular reactors (SMRs) and hybrid and fully electric propulsion; and
- The Group continues to invest in onsite renewable energy generation solutions for the Group's facilities and investment is included in the five-year forecasts to enable the Group to meet it's 2030 target for zero greenhouse gas emissions (scope 1 and 2) from operations and facilities.
The Directors have considered the impact of climate change on a number of key estimates within the financial statements, including:
- the estimates of future cash flows considered for trigger assessments or used in impairment assessments, where applicable, of the carrying value of non-current assets (such as programme intangible assets and goodwill);
- the estimates of future profitability used in assessing the recoverability of deferred tax assets in the UK (see note 5); and
- the long-term contract accounting assumptions, such as the level of EFHs assumed, which consider the future expectations of consumer and airline customer behaviour (see note 11).
As details of what specific future intervention measures will be taken by governments are not yet available, carbon pricing has been used to quantify the potential impact of future policy changes on the Group. The approach is consistent with that disclosed in note 1 in the 2021 Annual Report.
The climate related estimates and assumptions that have been considered to be key areas of judgement or sources of estimation uncertainty for the period ended 30 June 2022 are those relating to the recoverable amount of non-current assets including goodwill, capitalised development costs, recovery of deferred tax assets, recognition and measurement of provisions and recognition of revenue on long-term contracts. However, there have been no significant changes to assumptions, including the potential impact of carbon prices on the Group's cost base, since the year ended 31 December 2021.
1 Basis of preparation and accounting policies continued
Ukraine crisis
The Directors have considered the impact on the condensed consolidated financial statements from Russia's invasion of Ukraine. The following areas have been considered in preparing the financial statements:
- the impact to operating profit as a result of ceasing operations and trading in Russia;
- the resultant costs associated with the cessation of operations in Russia, including severance costs, asset impairments, and the write-down of inventory and financial assets; and
- the impairment of non-current assets where the Russian invasion of Ukraine, and resulting sanctions, meets the definition of a triggering event and impairment reviews have been performed where required.
The impact on the financial statements based on the above considerations was not material during the period.
Economic outlook
The Directors recognise the challenges in the current economic environment including escalating inflation, energy costs and challenges in the supply chain. The Group is actively managing the impacts associated with inflation and supply chain disruption through a sharper focus on pricing, productivity and costs. The Directors have considered these impacts in the estimates included within the cash flow forecasts used for the going concern assessment, recognition of deferred tax assets and long-term contract accounting assumptions. There has been no material impact on the financial statements as a result of these considerations.
1 Basis of preparation and accounting policies continued
Key areas of judgement and sources of estimation uncertainty
The determination of the Group's accounting policies requires judgement. The subsequent application of these policies requires estimates and the actual outcome may differ from that calculated. The key areas of judgement and sources of estimation uncertainty as at 31 December 2021, that were assessed as having a significant risk of causing material adjustments to the carrying amount of assets and liabilities, are set out in note 1 to the financial statements in the 2021 Annual Report and are summarised below. During the period, the Group has reassessed these and where necessary updated the key judgements and estimation uncertainties. Sensitivities for key sources of estimation uncertainty are disclosed where this is appropriate and practical.
Area
|
Key judgements
|
Key sources of estimation uncertainty
|
Sensitivities performed
|
Revenue recognition and contract assets and liabilities
|
Whether Civil Aerospace OE and aftermarket contracts should be combined.
How performance on
long-term aftermarket contracts should be measured.
Whether any costs should be treated as wastage.
Whether sales of spare engines to joint ventures are at fair value.
When revenue should be recognised in relation to spare engine sales.
|
Estimates of future revenue, including customer pricing, and costs of long-term contractual arrangements including the impact of climate change.
Estimates of the long-term foreign exchange rates.
Uncertainty remains in the short-term over the timing of recovery of demand, in particular in relation to the civil aviation industry, coming out of the COVID-19 pandemic. Estimates of future revenue within Civil Aerospace are based upon future EFH forecasts, influenced by assumptions over the time period and profile over which the civil aviation industry will recover.
|
Based upon the stage of completion of all large engine LTSA contracts within Civil Aerospace as at 30 June 2022, the following changes in estimate would result in catch-up adjustments being recognised in the period in which the estimates change (at underlying rates):
- A change in forecast EFHs of 1% over the remaining term of the contracts would impact LTSA income and to a lesser extent costs, resulting in an impact of around £10m. This would be expected to be seen as a catch-up change in revenue or, to the extent it impacts onerous contracts, within cost of sales.
- A 1% increase or decrease in our pricing to customers over the life of the contracts would lead to a revenue catch-up adjustment in the next 12 months of around £100m.
- A 1% increase or decrease in shop visit costs over the life of the contracts would change the stage of completion and lead to a revenue catch-up adjustment in the next 12 months of around £25m.
|
Risk and revenue sharing arrangements (RRSAs)
|
Determination of the nature of entry fees received.
|
|
|
Taxation
|
|
Estimates are necessary to assess whether it is probable that sufficient suitable taxable profits will arise in the UK to utilise the deferred tax assets. This is largely driven by the Civil Aerospace business and the estimates described above.
|
A 5% change in margin or shop visits (which could be driven by fewer flying hours as a result of climate change) would result in an increase/decrease in the deferred tax asset in respect of UK losses of around £150m, which equates to around a £1.2bn increase/reduction in profit.
If only 90% of assumed future cost increases are passed on to customers, this would result in a decrease in the deferred tax asset of around £40m, and if the potential impact of carbon prices on the Group's cost base was to double, this would be around £110m.
Further detail is included in note 5.
|
Discontinued operations and assets held for sale
|
Whether the ITP Aero business and associated consolidation adjustments meets the criteria to be classified as held for sale and a discontinued operation.
|
|
|
Research and development
|
Determination of the point in time where costs incurred on an internal programme development meet the criteria for capitalisation or ceasing capitalisation.
Determination of the basis for amortising capitalised development costs.
|
|
|
Leases
|
Determination of the lease term.
|
Estimates of the payments required to meet residual value guarantees at the end of engine leases. Amounts due can vary depending on the level of utilisation of the engines, overhaul activity prior to the end of the contract, and decisions taken on whether ongoing access to the assets is required at the end of the lease term.
|
The lease liability at 30 June 2022 included £452m relating to the cost of meeting these residual value guarantees in the Civil Aerospace business. Up to £119m is payable in the next 12 months, £125m is due over the following four years and the remaining balance after five years.
|
Impairment of non-current assets
|
Determination of cash-generating units for assessing impairment of goodwill.
|
|
|
Provisions
|
Whether any costs relating to contracts with customers should be treated as wastage.
|
Estimates of the time to resolve the technical issues on the Trent 1000, including the development of the modified high-pressure turbine (HPT) blade.
Estimates of the future revenues and costs to fulfil onerous contracts.
Estimates of the long-term foreign exchange rates.
|
A 12-month delay in the availability of the modified HPT blade could lead to a
£40-70m increase in the Trent 1000 wastage costs provision.
An increase in Civil Aerospace large engines estimates of LTSA costs of 1% over the remaining term of the contracts could lead to a £90-110m increase in the provision for contract losses across all programmes.
|
Post-retirement benefits
|
|
The valuation of the Group's defined benefit pension schemes are based on assumptions determined with independent actuarial advice. The size of the net surplus is sensitive to the actuarial assumptions, which include the discount rate used to determine the present value of the future obligation, longevity, and the number of plan members who take the option to transfer their pension to a lump sum on retirement or who choose to take the Bridging Pension Option (BPO).
|
A reduction in the discount rate from 3.90% to 3.65% could lead to an increase in the defined benefit obligations of the RR UK Pension Fund of approximately £260m. This would be expected to be broadly offset by changes in the value of scheme assets, as the scheme's investment policies are designed to mitigate this risk.
An increase in the assumed rate of inflation of 0.25% (RPI of 3.5% and CPI of 2.95%) could lead to an increase in the defined benefit obligations of the RR UK Pension Fund of approximately £90m.
A one-year increase in life expectancy from 21.8 years (male aged 65) and from 23.2 years (male aged 45) would increase the defined benefit obligations of the RR UK Pension Fund by approximately £215m.
Where applicable, it is assumed that 50% (31 December 2021: 50%) of members of the RR UK Pension Fund will transfer out of the fund on retirement with a share of funds transfer. An increase of 5% in this assumption would increase the defined benefit obligation by £20m.
|
2 Analysis by business segment
The analysis by business segment is presented in accordance with IFRS 8 Operating Segments, on the basis of those segments whose operating results are regularly reviewed by the Board (who acts as the Chief Operating Decision Maker as defined by IFRS 8). The Group's four divisions are set out below.
Civil Aerospace
|
- development, manufacture, marketing and sales of commercial aero engines and aftermarket services
|
Defence
|
- development, manufacture, marketing and sales of military aero engines, naval engines, submarine nuclear power plants and aftermarket services
|
Power Systems
|
- development, manufacture, marketing and sales of integrated solutions for onsite power and propulsion
|
New Markets
|
- development, manufacture and sales of small modular reactor (SMR) and new electrical power solutions
|
Other businesses include the trading results of the Bergen Engines AS business until the date of disposal on 31 December 2021 and the results of the Civil Nuclear Instrumentation & Control business until the date of disposal on 5 November 2021. The trading results of the UK Civil Nuclear business have also been included in Other businesses. The segmental analysis for the period to 30 June 2021 has been restated to reflect the 2022 definition of Other businesses.
ITP Aero has been classified as a disposal group held for sale and discontinued operation since 30 June 2021 and as such, the operating segment is no longer regularly reviewed by the Board as a basis for making decisions about the allocation of resources to the business or to assess its performance. In line with IFRS 8, ITP Aero is no longer considered to meet the definition of an operating segment and the segmental analysis for the period to 30 June 2021 has been restated to reflect the assessment of operating segments.
During the second half of the year to 31 December 2021, the Group assessed whether its New Markets activities met the criteria of an operating segment in accordance with IFRS 8. As the Group increases its investment in these important new technologies, the results of these activities have been combined and presented as an additional segment reflecting the differing characteristics and risk profile of these businesses in line with how performance is reviewed by the Board. These results were previously included within Other businesses and Corporate and Inter-segment. The segmental analysis for the period to 30 June 2021 has been restated to reflect the assessment of operating segments.
Underlying results
The Group presents the financial performance of the businesses in accordance with IFRS 8 and consistently with the basis on which performance is communicated to the Board each month.
Underlying results are presented by recording all relevant revenue and cost of sales transactions at the average exchange rate achieved on effective settled derivative contracts in the period that the cash flow occurs. The impact of the revaluation of monetary assets and liabilities using the exchange rate that is expected to be achieved by the use of the effective hedge book is recorded within underlying cost of sales. Underlying financing excludes the impact of revaluing monetary assets and liabilities to period end exchange rates. Transactions between segments are presented on the same basis as underlying results and eliminated on consolidation. Unrealised fair value gains/(losses) on foreign exchange contracts, which are recognised as they arise in the statutory results, are excluded from underlying results. To the extent that the previously forecast transactions are no longer expected to occur, an appropriate portion of the unrealised fair value gain/(loss) on foreign exchange contracts is recorded immediately in the underlying results.
Amounts receivable/(payable) on interest rate swaps which are not designated as hedge relationships for accounting purposes are reclassified from fair value movement on a statutory basis to interest receivable/(payable) on an underlying basis, as if they were in an effective hedge relationship.
In the period to 30 June 2022, the Group was a net seller (30 June 2021: net purchaser) of USD at an achieved exchange rate GBP:USD of 1.50 (30 June 2021: 1.39) based on the USD hedge book.
Estimates of future USD cash flows have been determined using the Group's base-case forecast. These USD cash flows have been used to establish the extent of future USD hedge requirements. In 2020, the Group took action to reduce the size of the USD hedge book by $11.8bn across 2020-2026, resulting in an underlying charge of £1.7bn being recognised within underlying finance costs and the associated cash settlement costs occurring over the period 2020-2026. The derivatives relating to this underlying charge have been subsequently excluded from the hedge book, and therefore are also excluded from the calculation of the average exchange rate achieved in the current and future periods. This charge was reversed in arriving at statutory performance on the basis that the cumulative fair value changes on these derivative contracts are recognised as they arise.
In the period to 30 June 2022, cash settlement costs of £265m were incurred (30 June 2021: £303m).
2 Analysis by business segment continued
Underlying performance excludes the following:
- the effect of acquisition accounting and business disposals;
- impairment of goodwill and other non-current and current assets where the reasons for the impairment are outside of normal operating activities;
- exceptional items; and
- certain other items which are market driven and outside of the control of management.
Acquisition accounting, business disposals and impairment
These are excluded from underlying results so that the current period and comparative results are directly comparable.
Exceptional items
Items are classified as exceptional where the Directors believe that presentation of the results in this way is useful in providing an understanding of the Group's financial performance. Exceptional items are identified by virtue of their size, nature or incidence.
In determining whether an event or transaction is exceptional, the Directors consider quantitative as well as qualitative factors such as the frequency or predictability of occurrence. Examples of exceptional items include one-time costs and charges in respect of aerospace programmes, costs of restructuring programmes and one-time past service charges and credits on post-retirement schemes.
Subsequent changes in exceptional items recognised in a prior period will also be recognised as exceptional. All other changes will be recognised within underlying performance.
Exceptional items are not allocated to segments and may not be comparable to similarly titled measures used by other companies.
Other items
The financing component of the defined benefit pension scheme cost is determined by market conditions and has therefore been included as a reconciling difference between underlying performance and statutory performance.
The tax effects of the adjustments above are excluded from the underlying tax charge. In addition, changes in tax rates or changes in the amount of recoverable deferred tax or advance corporation tax recognised are also excluded.
See page 32 for the reconciliation between underlying performance and statutory performance.
2 Analysis by business segment continued
The following analysis sets out the results of the Group's businesses on the basis described above and also includes a reconciliation of the underlying results to those reported in the condensed consolidated income statement.
-
|
Civil Aerospace
|
Defence
|
Power Systems
|
New Markets 1
|
Other businesses 1
|
Corporate and Inter-segment 1
|
Total underlying
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
For the half-year ended 30 June 2022
|
|
|
|
|
|
|
|
Underlying revenue from sale of original equipment
|
660
|
697
|
849
|
-
|
(7)
|
(5)
|
2,194
|
Underlying revenue from aftermarket services
|
1,679
|
912
|
522
|
1
|
-
|
-
|
3,114
|
Total underlying revenue
|
2,339
|
1,609
|
1,371
|
1
|
(7)
|
(5)
|
5,308
|
Gross profit/(loss)
|
256
|
326
|
401
|
(2)
|
(29)
|
(10)
|
942
|
Commercial and administrative costs
|
(183)
|
(86)
|
(204)
|
(9)
|
-
|
(17)
|
(499)
|
Research and development costs
|
(202)
|
(53)
|
(79)
|
(37)
|
-
|
-
|
(371)
|
Share of results of joint ventures and associates
|
50
|
2
|
1
|
-
|
-
|
-
|
53
|
Underlying operating (loss)/profit
|
(79)
|
189
|
119
|
(48)
|
(29)
|
(27)
|
125
|
|
|
|
|
|
|
|
|
For the half-year ended 30 June 2021
|
|
|
|
|
|
|
|
Underlying revenue from sale of original equipment
|
722
|
719
|
718
|
-
|
80
|
-
|
2,239
|
Underlying revenue from aftermarket services
|
1,446
|
1,002
|
463
|
2
|
75
|
-
|
2,988
|
Total underlying revenue
|
2,168
|
1,721
|
1,181
|
2
|
155
|
-
|
5,227
|
Gross profit
|
380
|
395
|
301
|
-
|
18
|
3
|
1,097
|
Commercial and administrative costs
|
(145)
|
(79)
|
(190)
|
-
|
(11)
|
(19)
|
(444)
|
Research and development costs
|
(237)
|
(47)
|
(69)
|
(28)
|
(5)
|
-
|
(386)
|
Share of results of joint ventures and associates
|
41
|
-
|
(1)
|
-
|
-
|
-
|
40
|
Underlying operating profit/(loss)
|
39
|
269
|
41
|
(28)
|
2
|
(16)
|
307
|
1 The underlying results of Other businesses and Corporate and Inter-segment activities for 30 June 2021 have been restated to reclassify the results of the Group's SMR and electrical activities as New Markets.
2 Analysis by business segment continued
Reconciliation to statutory results
|
Total underlying
|
Underlying adjustments and adjustments to foreign exchange
|
Group statutory results
|
|
|
|
£m
|
£m
|
£m
|
|
For the half-year ended 30 June 2022
|
|
|
|
|
Revenue from sale of original equipment
|
2,194
|
118
|
2,312
|
|
Revenue from aftermarket services
|
3,114
|
174
|
3,288
|
|
Total revenue
|
5,308
|
292
|
5,600
|
|
Gross profit
|
942
|
120
|
1,062
|
|
Commercial and administrative costs
|
(499)
|
(15)
|
(514)
|
|
Research and development costs
|
(371)
|
(2)
|
(373)
|
|
Share of results of joint ventures and associates
|
53
|
(5)
|
48
|
|
Operating profit
|
125
|
98
|
223
|
|
Gain arising on the disposal of businesses
|
-
|
77
|
77
|
|
Profit before financing and taxation
|
125
|
175
|
300
|
|
Net financing
|
(236)
|
(1,818)
|
(2,054)
|
|
Loss before taxation
|
(111)
|
(1,643)
|
(1,754)
|
|
Taxation
|
(77)
|
220
|
143
|
|
Loss for the period from continuing operations
|
(188)
|
(1,423)
|
(1,611)
|
|
Discontinued operations 1
|
59
|
(3)
|
56
|
|
Loss for the period
|
(129)
|
(1,426)
|
(1,555)
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Ordinary shareholders
|
(128)
|
(1,426)
|
(1,554)
|
|
Non-controlling interests
|
(1)
|
−
|
(1)
|
|
|
|
|
|
|
For the half-year ended 30 June 2021
|
|
|
|
|
Revenue from sale of original equipment
|
2,239
|
(4)
|
2,235
|
|
Revenue from aftermarket services
|
2,988
|
(64)
|
2,924
|
|
Total revenue
|
5,227
|
(68)
|
5,159
|
|
Gross profit/(loss)
|
1,097
|
(283)
|
814
|
|
Commercial and administrative costs
|
(444)
|
20
|
(424)
|
|
Research and development costs
|
(386)
|
(4)
|
(390)
|
|
Share of results of joint ventures and associates
|
40
|
(2)
|
38
|
|
Operating profit/(loss)
|
307
|
(269)
|
38
|
|
Loss arising on the disposal of businesses
|
-
|
(7)
|
(7)
|
|
Profit/(loss) before financing and taxation
|
307
|
(276)
|
31
|
|
Net financing
|
(174)
|
257
|
83
|
|
Profit/(loss) before taxation
|
133
|
(19)
|
114
|
|
Taxation
|
(29)
|
309
|
280
|
|
Profit for the period from continuing operations
|
104
|
290
|
394
|
|
Discontinued operations 1
|
43
|
(44)
|
(1)
|
|
Profit for the period
|
147
|
246
|
393
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Ordinary shareholders
|
147
|
246
|
393
|
|
Non-controlling interests
|
-
|
-
|
-
|
|
1 Discontinued operations relate to the results of ITP Aero and are presented net of intercompany trading eliminations and related consolidation adjustments.
2 Analysis by business segment continued
Disaggregation of revenue from contracts with customers
Analysis by type and basis of recognition
|
Civil Aerospace
|
Defence
|
Power Systems
|
New Markets 1
|
Other businesses 1
|
Corporate and Inter-segment 1
|
Total underlying
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
For the half-year ended 30 June 2022
|
|
|
|
|
|
|
|
Original equipment recognised at a point in time
|
660
|
304
|
838
|
-
|
-
|
(5)
|
1,797
|
Original equipment recognised over time
|
-
|
393
|
11
|
-
|
(7)
|
-
|
397
|
Aftermarket services recognised at a point in time
|
433
|
354
|
483
|
1
|
-
|
-
|
1,271
|
Aftermarket services recognised over time
|
1,215
|
558
|
39
|
-
|
-
|
-
|
1,812
|
Total underlying customer contract revenue
|
2,308
|
1,609
|
1,371
|
1
|
(7)
|
(5)
|
5,277
|
Other underlying revenue
|
31
|
-
|
-
|
-
|
-
|
-
|
31
|
Total underlying revenue
|
2,339
|
1,609
|
1,371
|
1
|
(7)
|
(5)
|
5,308
|
|
|
|
|
|
|
|
For the half-year ended 30 June 2021
|
|
|
|
|
|
|
|
Original equipment recognised at a point in time
|
721
|
301
|
707
|
-
|
80
|
-
|
1,809
|
Original equipment recognised over time
|
1
|
418
|
11
|
-
|
-
|
-
|
430
|
Aftermarket services recognised at a point in time
|
193
|
419
|
404
|
2
|
75
|
-
|
1,093
|
Aftermarket services recognised over time
|
1,197
|
583
|
59
|
-
|
-
|
-
|
1,839
|
Total underlying customer contract revenue
|
2,112
|
1,721
|
1,181
|
2
|
155
|
-
|
5,171
|
Other underlying revenue
|
56
|
-
|
-
|
-
|
-
|
-
|
56
|
Total underlying revenue
|
2,168
|
1,721
|
1,181
|
2
|
155
|
-
|
5,227
|
|
|
|
|
|
|
|
|
|
|
1 The underlying results of Other businesses and Corporate and Inter-segment activities for 30 June 2021 have been restated to reclassify the results of the Group's SMR and electrical activities as New Markets.
|
|
|
|
|
|
Total underlying
|
Underlying adjustments and adjustments to foreign exchange
|
Group statutory results
|
|
|
|
£m
|
£m
|
£m
|
|
For the half-year ended 30 June 2022
|
|
|
|
|
Original equipment recognised at a point in time
|
1,797
|
118
|
1,915
|
|
Original equipment recognised over time
|
397
|
-
|
397
|
|
Aftermarket services recognised at a point in time
|
1,271
|
72
|
1,343
|
|
Aftermarket services recognised over time
|
1,812
|
97
|
1,909
|
|
Total customer contract revenue
|
5,277
|
287
|
5,564
|
|
Other revenue
|
31
|
5
|
36
|
|
Total revenue
|
5,308
|
292
|
5,600
|
|
|
|
|
|
|
For the half-year ended 30 June 2021
|
|
|
|
|
Original equipment recognised at a point in time
|
1,809
|
(8)
|
1,801
|
|
Original equipment recognised over time
|
430
|
1
|
431
|
|
Aftermarket services recognised at a point in time
|
1,093
|
1
|
1,094
|
|
Aftermarket services recognised over time
|
1,839
|
(57)
|
1,782
|
|
Total customer contract revenue
|
5,171
|
(63)
|
5,108
|
|
Other revenue
|
56
|
(5)
|
51
|
|
Total revenue
|
5,227
|
(68)
|
5,159
|
|
2 Analysis by business segment continued
Underlying profit adjustments
|
|
Half-year to 30 June 2022
|
|
Half-year to 30 June 2021
|
|
|
Revenue
£m
|
Profit before financing
£m
|
Net financing
£m
|
Taxation
£m
|
|
Revenue
£m
|
Profit before financing
£m
|
Net financing
£m
|
Taxation
£m
|
Total underlying performance
|
|
5,308
|
125
|
(236)
|
(77)
|
|
5,227
|
307
|
(174)
|
(29)
|
Impact of settled derivative contracts on trading transactions 1
|
A
|
292
|
124
|
(464)
|
7
|
|
(68)
|
(293)
|
164
|
10
|
Unrealised fair value changes on derivative contracts held for trading 2
|
A
|
-
|
(5)
|
(1,442)
|
230
|
|
-
|
(4)
|
66
|
(1)
|
Unrealised net gain on closing future
over-hedged position 3
|
A
|
-
|
-
|
-
|
-
|
|
-
|
-
|
(8)
|
-
|
Realised net gain on closing future over-hedged position 3
|
A
|
-
|
-
|
-
|
-
|
|
-
|
-
|
(7)
|
-
|
Unrealised fair value change to derivative contracts held for financing 4
|
A
|
-
|
-
|
88
|
(24)
|
|
-
|
-
|
38
|
(10)
|
Exceptional programme credits 5
|
B
|
-
|
22
|
(3)
|
-
|
|
-
|
-
|
-
|
-
|
Exceptional restructuring charge 6
|
B
|
-
|
(32)
|
-
|
4
|
|
-
|
(11)
|
-
|
(6)
|
Impairment reversals 7
|
C
|
-
|
11
|
-
|
-
|
|
-
|
1
|
-
|
-
|
Effect of acquisition accounting 8
|
C
|
-
|
(23)
|
-
|
5
|
|
-
|
(26)
|
-
|
7
|
Pension past-service credit 9
|
B
|
-
|
1
|
-
|
(1)
|
|
-
|
11
|
-
|
(4)
|
Other
|
D
|
-
|
-
|
3
|
(1)
|
|
-
|
53
|
4
|
(15)
|
Included in operating profit
|
|
292
|
98
|
(1,818)
|
220
|
|
(68)
|
(269)
|
257
|
(19)
|
Gains/(losses) arising on the acquisitions
and disposals of businesses 10
|
C
|
-
|
77
|
-
|
-
|
|
-
|
(7)
|
-
|
-
|
Impact of tax rate change 11
|
|
-
|
-
|
-
|
-
|
|
-
|
-
|
-
|
328
|
Total underlying adjustments
|
|
292
|
175
|
(1,818)
|
220
|
|
(68)
|
(276)
|
257
|
309
|
Statutory performance per condensed consolidated income statement
|
|
5,600
|
300
|
(2,054)
|
143
|
|
5,159
|
31
|
83
|
280
|
A - FX, B - Exceptional, C - M&A and impairment, D - Other
1 The impact of measuring revenues and costs and the impact of valuation of assets and liabilities using the period end exchange rate rather than the achieved rate or the exchange rate that is expected to be achieved by the use of the hedge book increased reported revenues by £292m (30 June 2021: reduced by £68m) and increased profit before financing and taxation by £124m (30 June 2021: reduced profit by £293m). Underlying financing excludes the impact of revaluing monetary assets and liabilities at the period end exchange rate.
2 The underlying results exclude the fair value changes on derivative contracts held for trading. These fair value changes are subsequently recognised in the underlying results when the contracts are settled.
3 In 2020, the Group took action to reduce the size of the USD hedge book by $11.8bn across 2020-2026, resulting in an underlying charge of £1.7bn at 31 December 2020. In 2021, this estimate was updated to reflect the actual cash cost and resulted in a £15m gain to underlying finance costs in the period to 30 June 2021.
4 Includes the losses on hedge ineffectiveness in the period of £9m (30 June 2021: losses of £2m) and net fair value gains of £97m (30 June 2021: gains of £40m) on any interest rate swaps not designated into hedging relationships for accounting purposes.
5 During the period to 30 June 2022, contract loss provisions previously recognised in respect of the Trent 1000 technical issues which were identified in 2019 have been reversed due to a reduction in the estimated cost of settling the obligation. See note 15 for further details.
6 During the period to 30 June 2022, the Group recorded an exceptional restructuring charge of £32m (30 June 2021: charge of £11m) which includes £8m released from the provision and £40m which has been charged directly to the income statement in relation to a number of ongoing initiatives. Further details are provided in note 15.
7 The Group has assessed the carrying value of its assets. Further details are provided in notes 8 and 9.
8 The effect of acquisition accounting includes the amortisation of intangible assets arising on previous acquisitions.
9 The past-service credit of £1m includes a credit of £6m as a result of a constructive obligation recognised for the offering of the Bridging Pension Option (BPO) to other deferred members in the RR UK Pension Fund and a settlement loss of £5m on the Rolls-Royce North America retirement scheme.
10 Gains/(losses) arising on the acquisitions and disposals of businesses are set out in note 19.
11 The 2021 tax credit relates to the increase in the UK tax rate from 19% to 25%.
2 Analysis by business segment continued
Balance sheet analysis
|
|
|
Civil Aerospace
£m
|
Defence
£m
|
Power Systems
£m
|
New Markets
£m
|
Total reportable segments
£m
|
At 30 June 2022
|
|
|
|
|
|
|
|
Segment assets
|
|
|
16,769
|
3,196
|
3,915
|
105
|
23,985
|
Interests in joint ventures and associates
|
|
|
421
|
10
|
35
|
-
|
466
|
Segment liabilities
|
|
|
(24,183)
|
(2,922)
|
(1,620)
|
(47)
|
(28,772)
|
Net (liabilities)/assets
|
|
|
(6,993)
|
284
|
2,330
|
58
|
(4,321)
|
|
|
|
|
|
|
|
|
At 31 December 2021
|
|
|
|
|
|
|
|
Segment assets
|
|
|
15,846
|
2,766
|
3,531
|
90
|
22,233
|
Interests in joint ventures and associates
|
|
|
378
|
9
|
16
|
-
|
403
|
Segment liabilities
|
|
|
(20,745)
|
(2,635)
|
(1,503)
|
(33)
|
(24,916)
|
Net (liabilities)/assets
|
|
|
(4,521)
|
140
|
2,044
|
57
|
(2,280)
|
Reconciliation to the balance sheet
|
|
|
|
|
30 June 2022
|
31 December 2021
|
|
|
|
|
|
£m
|
£m
|
Reportable segment assets excluding held for sale
|
|
|
|
|
23,985
|
22,233
|
Other businesses
|
|
|
|
|
7
|
14
|
Corporate and inter-segment
|
|
|
|
|
(2,586)
|
(2,255)
|
Interests in joint ventures and associates
|
|
|
|
|
466
|
403
|
Assets held for sale 1
|
|
|
|
|
2,101
|
2,028
|
Cash and cash equivalents and short-term investments
|
|
|
|
|
2,748
|
2,629
|
Fair value of swaps hedging fixed rate borrowings
|
|
|
|
|
205
|
135
|
Deferred and income tax assets
|
|
|
|
|
2,530
|
2,339
|
Post-retirement scheme surpluses
|
|
|
|
|
1,157
|
1,148
|
Total assets
|
|
|
|
|
30,613
|
28,674
|
Reportable segment liabilities excluding held for sale
|
|
|
|
|
(28,772)
|
(24,916)
|
Other businesses
|
|
|
|
|
(31)
|
(11)
|
Corporate and inter-segment
|
|
|
|
|
2,475
|
2,139
|
Liabilities associated with assets held for sale 1
|
|
|
|
|
(781)
|
(723)
|
Borrowings and lease liabilities
|
|
|
|
|
(7,976)
|
(7,776)
|
Fair value of swaps hedging fixed rate borrowings
|
|
|
|
|
(103)
|
(98)
|
Deferred and income tax liabilities
|
|
|
|
|
(577)
|
(552)
|
Post-retirement scheme deficits
|
|
|
|
|
(1,109)
|
(1,373)
|
Total liabilities
|
|
|
|
|
(36,874)
|
(33,310)
|
Net liabilities
|
|
|
|
|
(6,261)
|
(4,636)
|
1 At 30 June 2022, assets and liabilities relating to ITP Aero are classified as held for sale. At 31 December 2021, assets and liabilities relating to ITP Aero, the investment in Airtanker Holdings and other non-current assets related to the Group's site rationalisation activities were classified as held for sale. For further details see note 19.
3 Research and development
|
Half-year to 30 June 2022
|
Half-year to 30 June 2021
|
|
£m
|
£m
|
Gross research and development costs
|
(599)
|
(549)
|
Contributions and fees 1
|
218
|
153
|
Expenditure in the period
|
(381)
|
(396)
|
Capitalised as intangible assets
|
48
|
41
|
Amortisation and impairment of capitalised costs 2
|
(40)
|
(35)
|
Net cost recognised in the income statement
|
(373)
|
(390)
|
Underlying adjustments relating to the effects of acquisition accounting, impairment and foreign exchange 3, 4
|
2
|
4
|
Net underlying cost recognised in the income statement
|
(371)
|
(386)
|
1 Includes government funding.
2 See note 7 for analysis of amortisation and impairment. During the prior period, amortisation of £5m has been incurred within the disposal group recognised as a discontinued operation.
3 During the period, no (30 June 2021: no) impairment of research and development was recorded.
4 Underlying adjustments relating to the effects of acquisition accounting, impairment and foreign exchange have been re-presented to align with the changes to segmental analysis. For further detail, see note 2.
|
Half-year to 30 June 2022
|
Half-year to 30 June 2021
|
|
Per consolidated income statement
|
Underlying financing 1
|
Per consolidated income statement
|
Underlying financing 1
|
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
Interest receivable
|
9
|
9
|
3
|
3
|
Net fair value gains on foreign currency contracts
|
−
|
−
|
25
|
-
|
Net fair value gains on non-hedge accounted interest rate swaps 2
|
97
|
−
|
40
|
-
|
Net fair value gains on commodity contracts
|
95
|
−
|
41
|
-
|
Financing on post-retirement scheme surpluses
|
14
|
−
|
7
|
-
|
Net foreign exchange gains
|
−
|
−
|
164
|
-
|
Realised net gains on closing over-hedged position 3
|
−
|
−
|
-
|
7
|
Unrealised net gains on closing over-hedged position 3
|
−
|
−
|
-
|
8
|
Financing income
|
215
|
9
|
280
|
18
|
|
|
|
|
|
Interest payable
|
(171)
|
(171)
|
(106)
|
(113)
|
Net fair value losses on foreign currency contracts
|
(1,537)
|
−
|
-
|
-
|
Finance charge relating to financial RRSAs
|
(6)
|
(6)
|
-
|
-
|
Financing on post-retirement scheme deficits
|
(12)
|
−
|
(10)
|
-
|
Net foreign exchange losses
|
(464)
|
−
|
-
|
-
|
Fees on undrawn facilities
|
(31)
|
(31)
|
(35)
|
(35)
|
Other financing charges
|
(48)
|
(37)
|
(46)
|
(44)
|
Financing costs
|
(2,269)
|
(245)
|
(197)
|
(192)
|
|
|
|
|
|
Net financing (costs)/income
|
(2,054)
|
(236)
|
83
|
(174)
|
|
|
|
|
|
Analysed as:
|
|
|
|
|
Net interest payable
|
(162)
|
(162)
|
(103)
|
(110)
|
Net fair value (losses)/gains on derivative contracts
|
(1,345)
|
−
|
106
|
15
|
Net post-retirement scheme financing
|
2
|
−
|
(3)
|
-
|
Net foreign exchange (losses)/gains
|
(464)
|
−
|
164
|
-
|
Net other financing
|
(85)
|
(74)
|
(81)
|
(79)
|
Net financing (costs)/income
|
(2,054)
|
(236)
|
83
|
(174)
|
1 See note 2 for definition of underlying results. Underlying financing has been re-presented to align with the changes to segmental analysis.
2 The condensed consolidated income statement shows the net fair value gains/(losses) on any interest rate swaps not designated into hedging relationships for accounting purposes. Underlying financing reclassifies the fair value movements on these interest rate swaps to net interest payable.
3 In 2020, the Group took action to reduce the size of the USD hedge book by $11.8bn across 2020-2026, resulting in an underlying charge of £1,689m at 31 December 2020. In 2021, this estimate was updated to reflect the actual cash settlement cost of £1,674m and resulted in a £15m gain to underlying finance costs in the year to 31 December 2021. The cash settlement costs of £1,674m covers the period 2020-2026, £186m was incurred in 2020, £452m was incurred in the year to 31 December 2021 and £265m was incurred in the period to 30 June 2022. The Group estimates that future cash outflows of £61m will be incurred in the remainder of 2022, £389m to be incurred in 2023 and £321m spread over 2024 to 2026.
The income tax expense has been calculated by applying the annual effective tax rate for each jurisdiction to the half-year profits of each jurisdiction.
The tax credit for the half-year is £143m on a statutory loss before taxation of £1,754m (30 June 2021: tax credit of £280m on a statutory profit before taxation of £114m), giving a statutory rate of 8.1% (30 June 2021: (245.9%)). The key driver of the tax credit in 2022 is the increase in the UK deferred tax asset relating to the unrealised foreign exchange losses on derivative contracts. This is reduced by tax charges on profits, mainly in the US and Germany. The key driver of the tax credit in 2021 was the impact of the increase in the UK tax rate from 19% to 25% on deferred tax assets.
Tax reconciliation - continuing operations:
|
Half-year to 30 June 2022
|
Half-year to 30 June 2021
|
|
£m
|
Tax rate
|
£m
|
Tax rate
|
|
|
|
|
|
(Loss)/profit before taxation
|
(1,754)
|
|
114
|
|
|
|
|
|
|
Nominal tax (credit)/charge at UK corporation rate of 19%
|
(333)
|
19.0%
|
22
|
19.0%
|
Tax losses in period not recognised in deferred tax 1
|
161
|
(9.2%)
|
(7)
|
(6.1%)
|
Increase in deferred taxes resulting from change in UK tax rate
|
−
|
−
|
(328)
|
(287.7%)
|
Other
|
29
|
(1.7%)
|
33
|
28.9%
|
Statutory tax credit and rate
|
(143)
|
8.1%
|
(280)
|
(245.9%)
|
|
|
|
|
|
Analysis of statutory tax credit:
|
|
|
|
|
Underlying items
|
77
|
|
29
|
|
Non-underlying items (see note 2)
|
(220)
|
|
(309)
|
|
|
(143)
|
|
(280)
|
|
1 Includes UK losses not recognised and movement on unrecognised deferred tax assets relating to foreign exchange and commodity financial assets and liabilities.
Deferred tax assets are recognised to the extent it is probable that future taxable profits will be available against which to recover the asset. Where necessary, this is based on the Directors' assumptions relating to the amounts and timing of future taxable profits. The Board continually reassesses the appropriateness of recovering deferred tax assets, which includes a consideration of the level of future profits and the time period over which they are recovered.
Sensitivity analyses are also performed as part of the assessment. At 30 June 2022, the following sensitivities have been modelled to demonstrate the impact of changes in assumptions on the recoverability of deferred tax assets:
- A 5% change in margin in the main Civil Aerospace large engine programmes;
- A 5% change in the number of shop visits driven by flying hours; and
- Assumed future cost increases from climate change expected to pass through to customers at 100% are restricted to 90% pass through.
A 5% change in margin or shop visits (which could be driven by fewer flying hours as a result of climate change) would result in an increase/decrease in the deferred tax asset in respect of UK losses of around £150m, which equates to around a £1.2bn increase/reduction in profit.
If only 90% of assumed future cost increases from climate change are passed on to customers, this would result in a decrease in the deferred tax asset of around £40m, and if the potential impact of carbon prices on the Group's cost base was to double, this would be around £110m. The assumptions for carbon prices are consistent to those at 31 December 2021.
As a consequence of the impact of COVID-19 on existing Civil Aerospace large engine programmes, taking into account the sensitivity analyses performed, and in light of the inherent uncertainty in estimating such long-term forecasts, the Group has not recognised a deferred tax asset in respect of 2022 UK losses. This includes losses arising from the IAS 37 amendment.
The reassessment of probable future taxable profits at the time the IAS 37 amendment came into effect was not materially different to the assessment performed at 31 December 2021. This is due to the timing of the utilisation and reflects that UK tax laws restrict the offset of carried forward losses to 50% of future profits. Therefore no deferred tax asset has been recognised on the transitional adjustment relating to the UK. The full details of the IAS 37 amendment are set out in note 1.
Deferred tax assets arising on additional unrealised losses on derivative contracts that remain hedged have also been assessed, resulting in a net increase in the deferred tax asset of £213m.
Both of these assessments are in line with the approach set out in note 5 of the 2021 Annual Report, and also take into account a 25% probability of there being a severe but plausible downside scenario.
The Group is reviewing the impact of the OECD Pillar Two (global minimum tax) rules and the associated UK draft legislation, which was released on 20 July 2022. These rules are expected to apply from 2024.
6 Earnings per ordinary share
Basic earnings per share (EPS) is calculated by dividing the (loss)/profit attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period, excluding ordinary shares held under trust, which have been treated as if they had been cancelled.
As there is a loss during the period, the effect of potentially dilutive ordinary shares is anti-dilutive.
|
Half-year to 30 June 2022
|
|
Half-year to 30 June 2021
|
|
Basic
|
Potentially dilutive share options
|
Diluted
|
|
Basic
|
Potentially dilutive share options
|
Diluted
|
(Loss)/profit attributable to ordinary shareholders (£m):
|
|
|
|
|
|
|
|
Continuing operations
|
(1,610)
|
|
(1,610)
|
|
394
|
|
394
|
Discontinued operations
|
56
|
|
56
|
|
(1)
|
|
(1)
|
|
(1,554)
|
|
(1,554)
|
|
393
|
|
393
|
Weighted average number of ordinary shares (millions)
|
8,345
|
−
|
8,345
|
|
8,331
|
18
|
8,349
|
EPS (pence):
|
|
|
|
|
|
|
|
Continuing operations
|
(19.29)
|
−
|
(19.29)
|
|
4.73
|
(0.01)
|
4.72
|
Discontinued operations
|
0.67
|
−
|
0.67
|
|
(0.01)
|
−
|
(0.01)
|
|
(18.62)
|
−
|
(18.62)
|
|
4.72
|
(0.01)
|
4.71
|
The reconciliation between underlying EPS and basic EPS is as follows:
|
Half-year to 30 June 2022
|
|
Half-year to 30 June 2021
|
|
Pence
|
£m
|
|
Pence
|
£m
|
Underlying EPS / Underlying (loss)/profit from continuing operations attributable to ordinary shareholders
|
(2.24)
|
(187)
|
|
1.25
|
104
|
Total underlying adjustments to (loss)/profit before tax (note 2)
|
(19.69)
|
(1,643)
|
|
(0.23)
|
(19)
|
Related tax effects
|
2.64
|
220
|
|
3.71
|
309
|
EPS / (loss)/profit from continuing operations attributable to ordinary shareholders
|
(19.29)
|
(1,610)
|
|
4.73
|
394
|
Diluted underlying EPS from continuing operations attributable to ordinary shareholders
|
(2.24)
|
|
|
1.25
|
|
|
Goodwill
£m
|
Certification costs
£m
|
Development expenditure
£m
|
Customer relationships
£m
|
Software 1
£m
|
Other
£m
|
Total
£m
|
Cost:
|
|
|
|
|
|
|
|
At 1 January 2022
|
1,060
|
933
|
3,393
|
475
|
978
|
833
|
7,672
|
Additions
|
-
|
1
|
48
|
-
|
30
|
9
|
88
|
Disposals
|
-
|
-
|
-
|
-
|
(22)
|
(1)
|
(23)
|
Exchange differences
|
48
|
1
|
35
|
25
|
8
|
15
|
132
|
At 30 June 2022
|
1,108
|
935
|
3,476
|
500
|
994
|
856
|
7,869
|
|
|
|
|
|
|
|
|
Accumulated amortisation and impairment:
|
|
|
|
|
|
|
At 1 January 2022
|
34
|
425
|
1,760
|
342
|
650
|
420
|
3,631
|
Charge for the period 2
|
-
|
11
|
40
|
18
|
42
|
16
|
127
|
Impairment
|
-
|
-
|
-
|
-
|
9
|
2
|
11
|
Disposals
|
-
|
-
|
-
|
-
|
(17)
|
(1)
|
(18)
|
Exchange differences
|
3
|
-
|
24
|
22
|
6
|
9
|
64
|
At 30 June 2022
|
37
|
436
|
1,824
|
382
|
690
|
446
|
3,815
|
|
|
|
|
|
|
|
|
Net book value:
|
|
|
|
|
|
|
|
30 June 2022
|
1,071
|
499
|
1,652
|
118
|
304
|
410
|
4,054
|
1 January 2022
|
1,026
|
508
|
1,633
|
133
|
328
|
413
|
4,041
|
1 Includes £98m (31 December 2021: £115m) of software under course of construction which is not amortised.
2 Charged to cost of sales and commercial and administrative costs except development costs, which are charged to research and development costs.
Intangible assets (including programme intangible assets) have been reviewed for impairment in accordance with IAS 36 Impairment of Assets. Assessments have considered potential triggers of impairment such as external factors including climate change, significant changes with an adverse effect on a programme and by analysing latest management forecasts against those prepared in 2021 to identify any deterioration in performance.
The Group believes there are significant business growth opportunities to come from Rolls-Royce playing a leading role in the transition to net zero, whilst at the same time climate change poses potentially significant risks. The assumptions used by the Directors are based on past experience and external sources of information. The main areas that have been considered are demand for engines and their useful lives, utilisation of the products whilst in service, and the impact of market and regulatory change. The investment required to ensure our new products will be compatible with net zero operation by 2030, and to achieve net zero scope 1 and 2 Greenhouse Gas (GHG) emissions is reflected in the forecasts used.
Where a trigger event has been identified, an impairment test has been carried out. Where an impairment was required the test was performed on the following basis:
- The carrying values have been assessed by reference to value in use. These have been estimated using cash flows from the most recent forecasts prepared by the Directors, which are consistent with past experience and external sources of information on market conditions over the lives of the respective programmes; and
- The key assumptions underpinning cash flow projections are based on estimates of product performance related estimates, future market share and pricing and cost for uncontracted business. Climate risks are considered when making these estimates consistent with the assumptions above. The uncertainty over the recovery from COVID-19 has been modelled by including downside forecasts at an appropriate weighting taking into account the business segment being considered.
There have been no individually material impairment charges or reversals recognised during the period.
8 Property, plant and equipment
|
Land and buildings
£m
|
Plant and equipment
£m
|
Aircraft and engines
£m
|
In course of construction
£m
|
Total
£m
|
Cost:
|
|
|
|
|
|
At 1 January 2022
|
1,865
|
4,986
|
1,046
|
300
|
8,197
|
Additions
|
10
|
42
|
11
|
37
|
100
|
Disposals/write-offs
|
(12)
|
(80)
|
(22)
|
(1)
|
(115)
|
Reclassifications 1
|
4
|
54
|
-
|
(58)
|
-
|
Exchange differences
|
52
|
132
|
10
|
14
|
208
|
At 30 June 2022
|
1,919
|
5,134
|
1,045
|
292
|
8,390
|
|
|
|
|
|
|
Accumulated depreciation and impairment:
|
|
|
|
|
|
At 1 January 2022
|
614
|
3,244
|
414
|
8
|
4,280
|
Charge for the period 2
|
33
|
152
|
27
|
-
|
212
|
Impairment 3
|
(1)
|
(8)
|
-
|
-
|
(9)
|
Disposals/write-offs
|
(7)
|
(77)
|
(15)
|
-
|
(99)
|
Exchange differences
|
18
|
84
|
5
|
-
|
107
|
At 30 June 2022
|
657
|
3,395
|
431
|
8
|
4,491
|
|
|
|
|
|
|
Net book value at:
|
|
|
|
|
|
30 June 2022
|
1,262
|
1,739
|
614
|
284
|
3,899
|
1 January 2022
|
1,251
|
1,742
|
632
|
292
|
3,917
|
1&n