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Evening Standard
Evening Standard
Michael Hunter

Rolls-Royce shares take off as profit guidance gains altitude

Rolls-Royce roared to the top of the FTSE 100 today, powered by a major overhaul of profit forecasts at the word-famous engineer.

The Derby-based multinational earns much of its revenue from the number of hours its Trent engines are in the air, flying Boeing and Airbus jets.

The strong recovery in demand for air travel means flying hours are expected to reach between 80% and 90% of pre-Covid levels, having been at 65% at the end of the first quarter.

That helped a rebound in half-year profit, which Rolls-Royce said today will fly past forecasts into a range between £660 million and £680 million, more than double City expectations of £328 million.

Its full-year forecasts were overhauled, with underlying operating profit now expected in a range between £1.2 billion to £1.4 billion, up from £934 million, helped by “higher volumes, commercial improvements and cost efficiencies”.

Rolls is also in the process of a turn-around plan drawn up by its new chief executive, the former oil industry executive Tufan Erginbilgic. He called the company “a burning platform” as he took the job. He said today “we are starting to see the early impact of our transformation.”

Shares added 34p to 186.3p – a rise of over a fifth in percentage terms – taking the stock to its highest level since March 2020, when it was falling amid the impact of Covid on the industry.

On the share price move, Michael Hewson at CMC Markets called the “optimism” on the outlook “well merited given that its main revenue earner was and still is maintenance revenue from the civil aviation industry,” adding:  “The return to normal after Covid has seen a big turnaround in Rolls-Royce’s cash flow as well as revenue prospects.”

Rolls-Royce’s full set of half-year numbers are due next week, on Thursday. There could also be further uplift for Rolls-Royce ahead. It said previously that it expected engine flying hours to return to pre-pandemic levels in 2024.

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