Rolls-Royce more than doubled profits last year after a turnaround led by boss Tufan Erginbilgic paid off amid an air travel recovery.
The engineering giant earned £1.6 billion in 2023, up from £652 million the year before. share price up as much as 11 percent.
And the company predicts further growth, with profits expected to reach £2 billion by 2024.
Profits for the past year exceeded analyst expectations of £1.4 billion, but the company’s investors were left without a payout to shareholders. The British defense company last paid a dividend in 2019.
Rolls-Royce explained that it has committed to resuming dividends once “the strength of our balance sheet is assured.”
Big boost: Profits at Rolls-Royce have increased by more than 200% since Tufan Erginbilgic (pictured) took over as boss
Julie Palmer, partner at Begbies Traynor, said: ‘Rolls-Royce investors may feel short-changed by the lack of shareholder payments, despite improved performance in 2023.’
Since former BP CEO Erginbilgic, who promised to quadruple profits by 2027, took over the 118-year-old group in January 2023, shares have risen more than 200 percent.
Yesterday they rose 8.3 percent, or 27.3p, to 356.8p. Rolls was the FTSE 100’s biggest gainer in 2023, with the shares having their best year since their 1987 public listing.
Erginbilgic said: “Our transformation has delivered record performance in 2023, driven by commercial optimization, cost efficiency and progress on our strategic initiatives.”
Rolls underperformed for years under previous bosses and nearly went bankrupt during the pandemic.
When Erginbilgic took over last year, he described the company as a “burning platform.”
Yesterday the company confirmed it had already achieved £150 million of the between £400 million to £500 million cost savings outlined in a transformation plan.
Last year, the company announced plans to cut 2,500 jobs, representing around 6 percent of its workforce, a move that will mainly affect non-technical positions.
Rolls is targeting profits of £2.8 billion by 2027 and hopes to increase margins in its core civil aerospace business to as much as 17 percent.
The company forecast operating profits of £1.7bn to £2bn for 2024, but warned that supply chain ‘challenges’ would persist for another two years.
Erginbilgic also used the results to launch an attack on the government, warning that the first of its mini nuclear reactors could be built in Europe instead of Britain if ministers fail to improve their decision-making to speed up.
He said he was confident the Derby company’s small modular reactor (SMR) technology was still well ahead of the competition.
But he said time is running out before Britain can benefit from its first mover advantage, as Rolls has also held discussions about deploying SMRs in Eastern Europe.
It comes as Great British Nuclear (GBN), the government body set up to lead Britain’s nuclear energy revival, prepares to choose which SMR prototypes to support from a shortlist of six companies, including Rolls.
After delays in the process, GBN has promised to announce the winners this spring.
But Erginbilgic warned the selection “would mean nothing” unless detailed decisions on where the reactors will be built are made within months.
Quilter Cheviot equity analyst Jarek Pominkiewicz said: ‘The impressive results were underpinned by the company’s transformation program and strategic initiatives, which aimed to improve commercial optimization and cost efficiency across the group… the recovery is largely on track.’
The motorcycle manufacturer said sales increased by 21 percent last year, from £12.7 billion to £15.4 billion.
Sales rose as governments increased military spending amid heightened global tensions in 2023.
And a recovery in air travel, as demand for holidays soared, helped boost sales and profits.
In the civil aerospace sector, large engine flight hours – a key performance measure – recovered to 88 percent of 2019 levels, up from 65 percent in 2022.
Orders for large engines reached a 15-year high, with major purchases by Air India and Turkish Airlines.
And the company predicts that transactions will recover or exceed pre-pandemic levels by the end of 2024.