Rolls-Royce Holdings PLC (LSE:RR.) powered ahead in 2022 with strong growth in revenue and profits and predicted further advances 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 31 December 2022, 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, 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.