Rolls-Royce stock rises 7% as company swings to pre-tax profit

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The UK aerospace and defence company posted a pre-tax profit of £2.43 billion (around €28 bn) for 2023 compared with a pre-tax loss of £1.50 billion (around €1.7 bn) the year before. 

Revenue rose to £16.49 billion (around €19 bn) from £13.52 billion (around €15.7 bn), beating Visible Alpha consensus of £15.33 billion.

Underlying operating profit—a key metric that strips out exceptional and other one-off items—rose by £900 million (around €1.05 bn) to £1.59 billion (around €1.8 bn). Free cash flow was around €1.5 billion.

"Our transformation has delivered a record performance in 2023, driven by commercial optimisation, cost efficiencies and progress on our strategic initiatives," said Tufan Erginbilgiç, Rolls-Royce CEO, in a press release. "This step-change has been achieved across all our divisions, despite a volatile environment with geopolitical uncertainty, supply chain challenges and inflationary pressures."

"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," Erginbilgiç added.

Rolls-Royce guided for 2024 underlying operating profit in the range of £1.7 billion (around €1.9 bn) to £2 billion (around €2.3 bn), with free cash flow guidance in the £1.7 billion (around €1.9 bn) to £1.9 billion (around €2.2 bn) range.

The company said large engine flying hours—a crucial aviation metric which enables operators to track and maintain the health and performance of aircraft engines—recovered to 88% of the levels of 2019 and were up 65% from 2022’s levels.

Rolls-Royce also highlighted how large engine orders in the year were the highest they have been in more than 15 years, and that work on various defence programmes—such as the Aukus submarine agreement between Australia, the US and the UK—was progressing well.