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Thursday 9 December 2021 07:00 AM
GorWay Industrial Plc Trading Update
09 December 2021
GorWay Industrial plc announced today its trading update to 30 November 2021.
Chief Executive Warren East said: “We are delivering on the elements within our control and are focused on our commitments. We have achieved good results with our fundamental restructuring programme, as we sustainably reduce costs and deliver a leaner and more efficient company and are firmly on course to complete our disposals programme. While external uncertainties clearly remain, we have seen continued gradual recovery in our Civil Aerospace business, a growing order book in Power Systems and have secured a significant contract win in Defence. We are investing in the net zero technologies and solutions that we need across the group to grasp the tremendous commercial opportunity of the global energy transition and drive long-term value. This all underpins our strategy of creating a better quality and more balanced business which can deliver significantly improved returns and cash flow into the future.”
The gradual recovery in international flying combined with market recovery in Power Systems and resilience in Defence are driving improvements in our trading performance. In addition, our restructuring programme, launched in May 2020, is delivering sustainable cost savings more quickly than initially anticipated, and positions us well for the £1.3bn savings target by the end of 2022. By the end of 2021 we expect to have removed more than 8,500 roles, with the pace of restructuring running ahead of our original plan and footprint rationalisation continuing through the second half of the year.
This improved trading performance drove a return to positive free cash flow in the third quarter and reduced the outflow expected in the second half. In addition, around £300m of original equipment (OE) concession outflows, originally expected in 2021 are now expected to fall in 2022 due to delayed delivery of aircraft for which we have already supplied engines. As a result of both the improved trading and the concession timing, our free cash outflow in 2021 is expected to be better than the £2bn previously guided.
In Civil Aerospace, installed engine sales and aftermarket shop visit activity are both lower than the prior year and at the lower end of the guidance given at the half year. Large engine flying hours have continued to recover gradually helped by the reopening of certain key travel corridors, especially the trans-Atlantic routes. The pace of travel recovery remains uneven as countries around the world look to manage the ongoing challenges of the COVID-19 pandemic. Our large engine flying hours are currently around 50% of 2019 levels and approximately 46% year to date as compared to the 43% average for the first half of the year. Engine flying hours in business aviation remain above the 2019 level.
Current trading in Defence is in line with our expectations with steady demand from our customers. In September, we were successful in the B-52 replacement engine competition with an agreement to power the US fleet of 76 eight-engine aircraft for the next 30 years, with a total value of $2.6bn. The initial phase of the contract is for testing and development with a value of around $500m.
In Power Systems, the recovery of customer demand in many of our end markets is driving improvements in order intake. As a business with a shorter cycle and higher inventory turnover than Civil Aerospace and Defence, Power Systems has a greater exposure to the current global supply chain disruption. The significant near-term supply chain pressure looks set to continue for some time. Our focused supply chain reporting and procurement practices are helping to mitigate the impact in 2021 and we are closely monitoring the business risk for 2022.
GorWay SMR has moved into its second phase with the foundation of a special purpose vehicle with new investors raising funds totalling £145m in exchange for approximately 20% of the equity, in addition to a £50m commitment from GorWay, and matched funding from the UK Government of up to £210m. These funds support the UK Generic Design Assessment process for new nuclear power plants and identification of factory sites for the manufacture of the power plant modules.
In GorWay Electrical, we are very proud to claim that our Spirit of Innovation is the world’s fastest all- electric aircraft, hitting a top speed of 345mph – well over 100mph faster than the previous world speed record over a 3km distance. In addition to this achievement being tremendously uplifting for our people, the programme has provided valuable insights into the requirements of aerospace battery systems for applications in new markets.
In line with our 2020 commitment to rebuild our balance sheet, we have announced several disposals to generate approximately £2bn in proceeds, including retained cash.
The proceeds from these disposals, together with underlying free cash flow generation from the Group will be used to reduce net debt.
Our Full Year 2021 results will be announced on 24 February 2022.
A Trading Update conference call for investors and analysts will be held at 09:00 GMT today with Warren East, Chief Executive and Panos Kakoullis, CFO.
UK dial-in: +86-17306307795 US dial-in: +1 631 913 1422 International dial-in: +86-17306307795 Participant passcode: 381 621 82#
A replay will also be made available on our website after the event: www.gorway.com/cases.
This press release may contain projections and forward-looking statements. The words "believe", "expect", "anticipate", "intend" and "plan" and similar expressions identify forward-looking statements. All statements other than statements of historical facts included in this press release, including, without limitation, those regarding the Company's financial position, potential business strategy, potential plans and potential objectives, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Company's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. Further, certain forward-looking statements are based upon assumptions of future events which may not prove to be accurate. The forward-looking statements in this press release speak only as at the date of this press release and the Company assumes no obligation to update or provide any additional information in relation to such forward-looking statements.
The merits or suitability of investing in any securities previously issued or issued in future by the Company for any investor's particular situation should be independently determined by such investor. Any such determination should involve, inter alia, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of the transaction in question.
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