Rolls-Royce: Booming travel demand underpins revival
Rolls-Royce has reaffirmed its full-year guidance for profit and cash flow as booming travel demand saw flying hours for its engines return to pre-pandemic levels.
In a trading update on Thursday, Rolls said large engine flying hours had hit 100 per cent of 2019 levels in the four months to 30 April, driven by recovery in international travel to Asia and its growing fleet.
Large engine flying hours are forecast to hit 100 to 110 per cent of 2019 levels this financial year, Rolls added, alongside a target of 500 to 550 OE (original equipment) deliveries.
Deutsche Bank analysts believe the “evolution of large engine flying hours will be key” to assessing the company’s performance as the turnaround under its new chief executive, Tufan Erginbilgic, continues.
Soaring demand for travel has underpinned the revival at Rolls over the last year, which has seen shares rise over 180 per cent and years of turbulence put in the rear view mirror. Latest data from the trade body IATA data shows international traffic rose 20 per cent globally in the first quarter, with Asia seeing the largest growth.
The engineering giant has also benefitted from increasing geopolitical tension around the globe, namely wars in Ukraine and the Middle East, which have increased military spending significantly.
The company was awarded a contract to build military submarines for the AUKUS programme, a trilateral defence partnership between Australia, the UK and the US. It said on Thursday that the long-term growth of its defence segment had been “underpinned” by several recent contract awards.
Erginbilgic will address investors at the firm’s AGM later today. He will comment: “Our work to transform Rolls-Royce into a high-performing, competitive, resilient and growing business is continuing with pace and intensity as we execute on the granular strategy we set out last November.
“We are driving growth, delivering contractual improvements and improved margins, unlocking efficiencies and creating value across the Group. We have had a strong start to the year, despite continued industry-wide supply chain challenges.
“This builds on our record performance in 2023 and provides further confidence in our guidance for 2024. The focused investments we are making will continue to drive growth and create value for all our stakeholders in the mid-term and beyond.”
Half-year results will be announced on 1 August.