Proactive Investors - Rolls Royce Holdings PLC powered ahead in 2022 with strong growth in revenue and profits and predicted more growth in 2023 as the recovery in international travel continues.
The FTSE 100-listed firm reported underlying Revenue of £12.69bn in the 12 months to December 31, up from £10.95bn in 2021, while underlying operating profit increased to £652mln compared to £414mln a year ago.
Operating margin improved to 5.1% from 3.8%, earnings per share rose to 1.95p against 0.11p while pre-tax profits also advanced to £206mln from £36mln.
The engineer said revenues rose as demand rebounded with large engine flying hours in Civil Aerospace up 35% year on year as recovery in international travel continued.
Operating profit was driven by higher profits in Civil Aerospace and Power Systems, partly offset by lower profit in Defence and increased investment in new markets.
The higher margin versus the prior year was driven by improvements in long-term service agreement contract margins and increased spare engines profit in Civil Aerospace.
Free cash flow from continuing operations improved from an outflow of £1.5bn in 2021 to an inflow of £0.5bn in 2022, driven by 35% growth in large engine flying hours, comparatively lower growth in large engine major shop visits at 19%, and higher Defence cash flow.
The improved cash flow position helped drive a hefty reduction in net debt from £5.2bn to £3.3bn, also aided by disposals.
Looking ahead and Rolls-Royce forecast operating profit between £0.8bn to £1bn in 2023 with free cash flow of £0.6bn to £0.8bn. The guidance assumes £100mln to £200mln of targeted contract improvements and large engine flying hours at 80-90% of 2019's level and 1,200-1,300 total shop visits.
The firm has also embarked on a transformation programme and strategic review.
Chief Executive Tufan Erginbilgic said, “Our transformation programme is already underway and is moving at pace. It will include a strategic review so that we can prioritise our investment towards the most profitable opportunities. We will report the findings together with our medium-term goals in the second half of this year."
No dividend was paid.
Ex-divs to weigh on Footsie
FTSE 100 is expected to extend yesterday’s losses at the open after the minutes from the Federal Open Market Committee meeting signalled no let up in the Fed’s push to tame inflation suggesting more rate rises are to come.
A number of index heavyweights, including AstraZeneca, Barclays, Endeavour Mining, GSK, Land Securities, Standard Chartered, Unilever go ex-dividendswhich will also weigh on the Footise reducing the FTSE 100 by 20.62 points.
Spread betting companies are calling London’s lead index down by around 12 points.
Ipek Ozkardeskaya senior analyst at Swissquote Bank described the minutes as “hawkish.”
“They confirmed that the Federal Reserve (Fed) officials are indeed not lying when they say that they will continue hiking the interest rates to tame inflation toward the 2% mark.”
“And the minutes show that they reckon it will take ‘some time’. “
“How much time? We don’t know. Even they don’t know. But we know that the job is not done yet, and the next meeting’s 25bp increase won’t be the last one. “
“We also know that most officials remain favourable for small increases – for longer. But some think that a 50bp hike would be appropriate. The odds for a 50bp hike for the March FOMC meeting now climbed to 24%.”
US markets ended mixed with the Dow was down 85 points, or 0.3%, to 33,045, the Nasdaq Composite gained 15 points, 0.1%, to 11,507 and the S&P 500 lost 6 points at 3,991.
Inflation remained “well above” the Fed’s 2% target, according to the minutes, even amid signs that inflation is declining.
“Inflation data received over the past three months showed a welcome reduction in the monthly pace of price increases but stressed that substantially more evidence of progress across a broader range of prices would be required to be confident that inflation was on a sustained downward path," the minutes said.
Meanwhile, the labor market remains “very tight, contributing to continuing upward pressures on wages and prices.”
Back in London and a busy day of results sees BAE Systems, Drax, Rolls-Royce, Serco and Anglo American among those reporting numbers.