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(Alliance News) - Rolls-Royce Holdings PLC on Tuesday said it planned to exit Rolls-Royce Electric in the short run or reduce its position to a minority stake, as it laid out its mid-term targets.
The London-based aero engine maker at its capital markets day said its targets will represent "a step change" in its financial performance.
For a "2027 timeframe", it is targeting an operating profit between GBP2.5 to GBP2.8 billion, at an operating margin between 13% and 15%. It is also aiming for free cash flow of GBP2.8 to GBP3.1 billion, with a return on capital between 16% and 18%.
"We expect a progressive, but not necessarily linear, improvement year-on-year, and if we can accelerate the achievement of our ambitions we will," Rolls-Royce said.
In 2022, Rolls-Royce's underlying operating profit, to which it compared its goals, was GBP652 million in 2022, up 57% from GBP414 million in 2021. Its underlying operating margin was 5.1%, improved from 3.8%. Free cash flow was GBP505 million, swung from negative GBP1.49 billion.
The firm is also planning a divestment programme targeting GBP1.0 to GBP1.5 billion in proceeds over five years. It is looking to exit Rolls-Royce Electric in the short run or reduce its position to a minority stake, while pursuing a full exit down the line.
It also noted that recent trading was in line with expectations for the full year, and it expects profit and cash in 2023 to be "materially ahead" of 2022.
Rolls-Royce shares rose 7.4% to 261.10 pence each on Tuesday morning in London.
By Tom Budszus, Alliance News slot editor
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