Derby engineering giant Rolls-Royce is back on track as it looks to “future proof” its business from suffering any further huge downswings like the one caused by Covid. The firm’s city-based jet engine arm suffered drastically during the global pandemic as worldwide air travel plummeted.
The company as a whole went from making annual profits in the billions to huge losses, like the £3.1bn lost in 2020. It has only just climbed back into profit in the tens of millions, after profits of £124m for 2021 were announced in February.
The firm, which is confident about the medium-term prospects of its Sinfin-headquartered civil aerospace division, has announced it is looking at investing in areas besides standard jet work, in a bid to avoid future peaks and troughs in performance and profits.
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This week it revealed it is setting up a new nuclear engineering academy in Derby and is looking for 200 youngsters for its first intake of apprentices starting in September. The training center is supported by the Nuclear Advanced Manufacturing Research Centre, which is building a £15 million research facility at Infinity Park.
And today, departing chief executive Warren East laid out plans which will hopefully help the firm emerge from the pandemic as a “better balanced and more resilient” business. Mr East, who is stepping down later this year, is confident the manufacturing giant has a “sustainable future” after predicting it will “achieve positive profit and cash” this year.
He said that the company was focused on long-term business opportunities as the world transitions to more sustainable energy. Effectively, Rolls-Royce customers are looking for more fuel efficient engines and more environmentally friendly power solutions.
To achieve this aim, Rolls-Royce is working on the more fuel-efficient UltraFan engine, being developed in Derby, and hydrogen-fueled engines and fuel cells in Power Systems, to new all-electric and hybrid electric aviation products being created by Rolls -Royce Electrical (in part in Derby). It also hopes that its small modular reactor power stations, developed with expertise drawn from the Raynesway site, will contribute to more sustainable energy supplies in the UK and around the world.
He was speaking in the firm’s latest trading update announced today, Thursday, May 12, ahead of addressing shareholders at the company’s annual general meeting. Mr East said: “As a result of the actions we have taken, we have made significant progress on the path to recovery from the impact of Covid-19 and are emerging as a better balanced and more resilient business, focused on the long-term business opportunities presented by the global energy transition.”
The business traded in line with expectations in the first four months of the year, helped by a gradual post-pandemic return to flying. It said engine flying hours for the first four months of 2022 were 42% higher than the year before, Business Live reports.
The company said passenger demand for flying was recovering on routes where travel restrictions have been lifted, such as in Europe and the Americas, but additional Covid-19 restrictions had resulted in fewer flights in China where the situation was still evolving. The engineering firm said it was “continuing to capitalize” on new opportunities in 2022. Mr East has previously said that he expects flying activity in the long-haul market, in which the Derby-made Trent engines operate, to return to pre-pandemic levels in 2024/25.
Earlier this month, Australian airline Qantas confirmed it was investing in a dozen Rolls-Royce-powered Airbus A350-1000s for the launch of its first non-stop flights between London to Sydney and Melbourne. The airline has ordered 12 of the new plans – powered by Trent XWB-97 engines made in Derby – which are capable of flying half way around the world without needing to land.
Rolls-Royce has cut nearly 9,000 jobs from its global workforce since the pandemic hit. It has also already announced plans to sell off four of its ancillary businesses – two of which were sold in 2021. The sales are expected to generate around £2bn for the company.
Mr East added: “We are confident that we have positioned the business to achieve positive profit and cash this year, driven by the benefits of our cost reductions.”
In this morning’s update, Rolls-Royce also confirmed it was working closely with its supply chain to limit the impact of disruption caused by global uncertainties such as the war in Ukraine. Around 20% of the company’s titanium supplies come from Russia, but the engineering firm has been stockpiling for months in preparation. At the end of February, the company decided to pause all activity with its Russian airline customer Aeroflot.
Rolls-Royce’s next scheduled trading update is on August 4, 2022, when the company will publish its half year results.
Reacting to today’s trading update, John Forkin, managing director of Marketing Derby, said: “It’s great to see Rolls-Royce getting back on track after the tough impact of the pandemic. They are such an important contributor to both our local and national economy. Excellence and innovation has always been core to their DNA and recent developments in new green tech reinforce this.”
East Midlands Chamber chief executive Scott Knowles added: “A successful Rolls-Royce goes hand-in-hand with a buoyant Derby and surrounding area, so it’s very pleasing to hear the company is emerging from a difficult period with greater resilience. The direct impact of the pandemic was obvious on sectors such as aerospace as borders closed and plans were grounded, leading to a very severe knock-on impact for manufacturers and their supply chains.
“Although it is now benefitting from the world beginning to open up again, like with many other firms and industries this experience has perhaps crystalized the need to diversify its business, and we’ve seen some hugely exciting projects such as in electric aviation as part of the drive towards net zero. Rolls-Royce also looks set to play a central role in our world’s future energy mix with its small modular reactors, which could soon provide clean and affordable energy to communities on a flexible basis.
“These projects are testament to the firm’s fantastic heritage in innovation, which will enable Rolls-Royce continues to be a hugely important part of the Derbyshire and wider East Midlands economy long into the future – employing and upskilling thousands of our people while driving investment and wealth into our communities.”
Below are details of major projects being carried out by Rolls-Royce as part of its “sustainable future” plan:
The firm could be supplying power to the national grid through nuclear reactors in just seven years. A new generation of mini-nuclear power stations could receive the go-ahead as early as 2024, and could create tens of thousands of jobs. Much of the expertise in the development of the reactors comes from Derby-based nuclear engineers at the Raynesway site.
Rolls-Royce, alongside BAE Systems, has recently been awarded contracts worth over £2 billion to build four new Dreadnought nuclear submarines, replacing the Royal Navy’s existing fleet. The apprentices from the new nuclear engineering academy will help develop the new submarines, working alongside experts at its Raynesway operations centre.
It is also set to invest £80 million and create around 300 jobs in the Midlands over the next nine years developing energy storage systems (ESS) for electric aircraft. The company is looking to pioneer sustainable power which will enable aircraft to undertake zero emissions flights of over 100 miles on a single charge.
An ongoing major project to build the world’s biggest jet engine is continuing to progress at Victory Road. A project engine demonstrator will go on test in Sinfin later this year and its first run will be on 100 per cent Sustainable Aviation Fuel.
At the same site, Testbed 80 cost around £90 million and took three years to build before opening in May, last year. The engines that are tested there are not those which you see jetting around the world underneath the wing of an airliner, but instead are used for research so that Rolls-Royce can develop more resilient and efficient engines which allow for longer and smoother air travel.