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 flew out on Thursday after spol significantly exceeded expectations with a 57% year-on-year increase in underlying profit, driven by its civil aerospace and energy systems.
Its shares were up 23% at around 1.30pm London time. The company posted an underlying profit of 652 million pounds ($786 million) last year, up 238 million pounds from 2021 – beating analysts’ estimates of nearly 478 million pounds, according to a Reuters poll. Rolls-Royce’s free cash flow from continuing operations increased by £2bn year-on-year to £505m in 2022.
The company attributed the results to resurgent demand for international travel and saw a 35% year-on-year increase in large engine flight hours in civil aviation. The aviation industry is recovering from the severe pressure it suffered during the Covid-19 pandemic, when international mobility was stifled by blockades and higher barriers to passenger entry.
Rolls-Royce said it would not make any shareholder payments in the 2022 financial year, but pledged to return to an investment-grade credit rating and continue the practice, without specifying a timetable.
The company is undergoing a transformation program to improve its performance in 2023, led by Tufan Erginbilgic — a former BP executive who He replaced Warren East in January. The program will include a strategic review, with Rolls-Royce announcing its subsequent medium-term objectives in the second half of this year.
The company anticipates “continued recovery in our end markets” and further revenue growth in 2023, estimating operating profit between £0.8bn and £1bn and a new cash flow outlook of £0.6bn to £0.8bn.
The surge puts Rolls-Royce shares in line with Deutsche Bank analysts’ price target of £1.36.
