Rolls-Royce has held full-year guidance as the engineering giant continued to benefit from soaring demand for its aircraft engines and increased defence spending.
In a trading update published this morning, the FTSE 100 firm said it expected underlying operating profit of between £2.1bn to £2.3bn in the current year and free cash flow of £2.1bn to £2.2bn, unchanged from a prior forecast in August.
It flagged continuing strong demand in Civil Aerospace, where large engine flying hours grew by 18 per cent year-on-year to 102 per cent, surpassing the levels seen before the pandemic wiped out passenger numbers.
Flying hours are expected to come in at between 100 to 110 per cent pre-pandemic levels for the full-year, with around 500 to 550 deliveries.
Demand in defence also held strong after years of booming government spending brought on by Vladimir Putin’s invasion of Ukraine and conflict in the Middle East.
Shares are up a whopping 91 per cent this year to date.
Rolls-Royce warns on outlook
However, Rolls-Royce warned of ongoing challenges in the aerospace industry’s supply chain. The firm was blamed for cancelling a string of British Airways flights last month amid issues with its Trent 1000 engines, fitted to the airline’s Boeing 787 aircraft.
Issues have plagued the wider sector since the pandemic. The world’s two largest aircraft manufacturers, Airbus and Boeing, have struggled to meet booming global demand for travel, leading to significant delivery delays to the world’s biggest airlines. Other issues have included problems with Wizz Air’s Pratt & Whitney-manufactured engines, which has seen fleets grounded for inspection.
The engineering giant still expects to reinstate shareholder dividends by the end of the year though, starting with a 30 per cent pay-out ratio of underlying post-tax profit and with an ongoing pay-out ration of 30 to 40 per cent in each of the following years.
Chief Executive Tufan Erginbilgic, who has led a remarkable turnaround in the firm’s share price since joining in January 2023, said: “Our transformation of Rolls-Royce into a high-performing, competitive, resilient and growing business continues with pace and intensity.
“Continued good performance year to date gives us further confidence in the delivery of our 2024 guidance despite a supply chain environment which remains challenging. We are also making good progress towards our mid-term targets, with a front-end loaded delivery of profit and cash flow improvements.”
