Rolls-Royce profits more than doubled last year alongside record free cash flow, as engineering giant’s new chief executive led a remarkable turnaround.
Underlying operating profit jumped to £1.6bn from £652m, well ahead of analysts expectations and driven by the group’s Civil Aerospace segment. Analysts had forecast gains of £1.4bn after new boss Tufan Erginbilgic raised expectations in July.
The rise in operating profits drove Rolls-Royce to record free cash flow of £1.3bn, while return on capital more than doubled to 11.3 per cent. Revenues came in at £15.4bn, up from £12.7bn.
In a statement, Erginbilgic said: “Our transformation has delivered a record performance in 2023, driven by commercial optimisation, cost efficiencies and progress on our strategic initiatives. This step-change has been achieved across all our divisions, despite a volatile environment with geopolitical uncertainty, supply chain challenges and inflationary pressures.
The Turkish businessman’s first year at Rolls-Royce proved a glowing success. Investors have been impressed by his no-nonsense cost-cutting approach and shares topped the FTSE 100 last year.
Increased demand for its jet engines and rising military spend around the world have also been key to its success, bumping up margins in its Civil Aerospace and Defence units.
Underlying operating profits in Civil Aerospace rose 497 per cent to £850m last year, alongside a near-third increase in revenue.
Erginbilgic added: “Our strong delivery in 2023 gives us confidence in our 2024 guidance and is a significant step towards our mid-term targets. We are unlocking our full potential as a high-performing, competitive, resilient, and growing Rolls-Royce.”
Rolls-Royce expects underlying operating profits will rise by 6 per cent in 2024, to between £1.7bn and £2bn, alongside free cash flow of £1.7bn to £1.9bn.
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