Roll royce jet engine
The upbeat share price can be attributable to a profit forecast upgrade last November / Image source: Adobe
  • 2023 pre-tax profit hits £1.26 billion
  • Shares up 227% over the past year
  • Free cash flow guidance tops estimates

Shares in Rolls Royce (RR.) gained over 8% to 358p in morning trading as the aircraft maker saw operating profit more than double to £1.6 billion in 2023 compared with £652 million the previous year.

Statutory net cash flow from operating activities was £2.5 billion, £1 billion higher year-on-year.


The company said it expected to make ‘continued progress’ in 2024 with underlying operating profit of between £1.7 billion and £2 billion and free cash flow between £1.7 billion and £1.9 billion.

Consensus forecasts put free cash flow generation at £1.3 billion this year, so today's guidance will trigger more analyst upgrades.

Over the past year, Rolls-Royce shares have gained over 200% making it one of the biggest risers in the FTSE 100. Last November, the aircraft maker said profits could quadruple by 2027.

Rolls Royce shares climb 7% to new four-year high on ambitious new profit targets

Chief executive Tufan Erginbilgiç said: ‘Our transformation has delivered a record performance in 2023, driven by commercial optimisation, cost efficiencies and progress on our strategic initiatives.’

Erginbilgiç took over the top job at Rolls-Royce in January 2023, prior to which he was an executive at oil giant BP (BP.).


Russ Mould, investment director at AJ Bell, commented: ‘Erginbilgiç may be a smart general but he’s also a lucky one. A recovery in aviation was always likely to translate into higher revenue, profit, and cash flow for Rolls.

‘The amount of time that planes are in the air has a direct impact on the amount Rolls makes on spares and repairs contracts for its large installed base of aircraft engines. This installed base itself is also growing as large engine orders were the highest in more than 15 years.’

Julie Palmer, partner at Begbies Traynor, said: ‘It's positive to see how net debt has been whittled down to £2 billion from over £3.2 billion in 2022, but the real story is that this has been aided by burgeoning earnings.

‘Rolls-Royce’s largest division, civil aerospace, is providing some real momentum, with engine orders at the highest level in 15 years, meaning the group is on track to meet its ambitious targets.

‘The ongoing restructuring of Rolls-Royce will not be pain-free – a total of 2,500 jobs worldwide are expected to be lost as part of its cost-cutting drive, with several key businesses sold.

‘However, this morning’s results build upon the British engineering firm’s status as the FTSE 100's biggest riser in 2023 and it looks well-positioned to continue to rise in 2024 alongside many other aerospace and defence names.’


DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Ian Conway) own shares in AJ Bell. 




Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account. AJ Bell logo

Issue Date: 22 Feb 2024