- Rolls Royce’s full-year underlying revenue grew from £12.7bn to £15.4bn
- Underlying operating profit rose £0.9bn to £1.6bn
- Record free cash flow of £1.3bn, up from £0.5bn
Aarin Chiekrie, equity analyst, Hargreaves Lansdown:
“Rolls Royce’s full-year results capped off a stellar year for the FTSE 100’s top performer of 2023. Underlying operating profit and free cash flow came in well ahead of prior guidance, helping to fuel positive sentiment around this engine-maker.
Heading into the new year, the group continues to benefit from sector-wide tailwinds like a huge backlog of plane orders and pent-up consumer demand for travel, meaning there’s set to be more of the group’s market-leading engines on wings. Given that a large chunk of its revenue comes from servicing those engines, with business based on how long those engines spend in the air, investors should be pleased to see so-called engine flying hours (EFH) rise to 88% of 2019 levels last year. That figure’s set to soar to new heights this year, with the group expecting EFH to hit 100-110% of 2019 levels.
The group’s mid-term guidance, which lays out targets for 2027, now looks well within reach. By this point, annual operating profits are expected to climb to a £2.5-2.8bn range, with the main driver of this being much higher margins in its Civil Aerospace division. Now it’s back in positive free cash flow territory, Rolls has made good headway in pushing debt lower. That will strengthen the balance sheet and adds weight to market expectations for a reinstatement of the dividend later this year.”
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