July 21, 2024

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Rolls-Royce targets vast upturn in profits

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Rolls-Royce said it would quadruple its profits in the next four years and sell its electric aircraft division as chief executive Tufan Erginbilgic tries to make good on his promise to turn around the UK aerospace company.

The demanding profit target is the centrepiece of a long-awaited shake-up by Erginbilgic, a former BP executive who was parachuted into the top job in January to help Rolls-Royce recover from the damage inflicted by the pandemic and previous restructurings.

Under the plan, the FTSE 100 group is aiming for operating profit of up to £2.8bn by about 2027, four times the amount it reported last year.

The group is aiming to increase operating margins to 13 per cent to 15 per cent over the period. In its core civil aerospace business, it expects to achieve operating margins of between 15 and 17 per cent, up from 2.5 per cent in 2022, in a move that would bring it closer to rivals such as General Electric.

Erginbilgic said on Tuesday that the “new Rolls-Royce” would have the financial strength to invest in growth and grow shareholder returns.

“These targets are not destinations . . . They are milestones around 2027. This company, when we create that, it will continue to grow longer-term,” he told reporters on Tuesday.

Rolls-Royce is relying on cost cuts for some of the growth. It is seeking annual savings of up to £500mn and last month announced plans to cut up to 2,500 jobs. It is also targeting £3.1bn in free cash flow by about 2027.

Rolls-Royce builds and maintains large engines for widebody aircraft including Airbus A350 jets and Boeing’s 787, and earns most of its revenues when its engines are flying, as well as from after-market sales. The company’s defence business builds engines for submarines and fighter jets, while its power systems business makes diesel and gas engines for ships and for power…

2023-11-28 07:49:59

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