Rolls Royce Trent XWB engines, designed specifically for the Airbus A350 family of aircraft, are seen on the assembly line at the Rolls Royce factory in Derby, November 30, 2016.
Paul Ellis | Reuters
Shares in the London-listed aircraft manufacturer Rolls Royce soared on Thursday, after the company significantly beat expectations with a 57% year-on-year increase in underlying profit, led by its aerospace and civil electrical systems.
Its stock was up 23% around 1.30pm London time. The company recorded £652m ($786m) of underlying profit last year, £238m more than in 2021 – beating analysts’ forecasts of almost £478m , according to Reuters. Rolls-Royce’s free cash flow from continuing operations added £2bn in the year to £505m in 2022.
The company attributed the results to the recovery in international travel demand, noting a 35% year-over-year increase in large-engine flight hours for civil aerospace. The aviation sector is recovering from severe pressure during the Covid-19 pandemic, when closures and higher barriers to entry for passengers stifled international mobility.
Rolls-Royce said it would make no payments to shareholders for the 2022 financial year, but pledged to return to an investment grade credit rating and resume the practice, without specifying a timeline.
The company is undergoing a transformation program to improve its performance in 2023, led by Tufan Erginbilgic – the former BP executive who took over from Warren East in January. The program will include a strategic review, with Rolls-Royce due to announce its mid-term goals in the second half of this year.
Company forecasts ‘continued recovery in our end markets’ and further increase in yields in 2023, publishing operating profit guidance between £0.8bn and £1bn and new stream outlook cash of £0.6 billion to £0.8 billion.
The rise brings Rolls-Royce shares in line with Deutsche Bank analysts’ price target of £1.36.
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