Rolls-Royce shares skyrocket over 20 per cent after profit guidance doubled
Rolls-Royce shares skyrocketed more than 20 per cent this morning after it raised its full year profit guidance on the back of a boom in long-haul flying and increased defence spending.
The aerospace giant also said that half year profits are expected to be “materially above” expectations, with the company looking to make £680m, double the previous forecast of £328m.
Full year underlying operating profits could reach as high as £1.2-1.4bn, up from a previous consensus of £934m.
The improvement was led by revenue growth across its Civil Aerospace and Defence segments, which it now expects to see operating profits of £400m and £200m respectively, in its first half results next week.
CEO Tufan Erginbilgic, who was appointed in January, said his “multi-year transformation programme has started well with progress already evident in our strong initial results and increased full year guidance for 2023.”
Erginbigic added: “Despite a challenging external environment, notably supply chain constraints, we are starting to see the early impact of our transformation in all our divisions. Better profit and cash generation reflects greater productivity, efficiency and improved commercial outcomes.”
Rolls-Royce also said it expects full year 2023 free cash flow of £0.9bn-£1.0bn, up from previous forecasts of between £600-800m, reflecting the higher than expected underlying operating profits.
It comes after a strong first half of the year for the London-listed aviation manufacturer, which has benefitted from recovering demand for international travel as well as increased defence spending as a result of the war in Ukraine.
The firm appointed Tufan Erginbilgic as chief executive in January, taking over from longtime chief Warren East, whose sudden departure in February wiped £1.5 billion off the companies’ value.
The new boss has aimed to shake up the business following years of underperformance pre-2023 and a disastrous pandemic period, which saw its Civil Aerospace segment near wiped out as airline fleets around the world were grounded.
Erginbilc said in May that some of the companies’ key divisions had been “grossly mismanaged,” stating that it was a “burning platform” which needs to cut debt and improve profits.