Rolls-Royce Holdings PLC (LSE:RR.) announced plans for disposals of up to £1.5 billion as it unveiled mid-term financial targets which are set to “deliver record future performance” as chief executive Tufan Erginbilgic’s turnaround continues.
In a statement released ahead of today's Capital Markets Day event, the company said it is aiming to become “financially stronger and more resilient”, targeting operating profit of £2.5-£2.8 billion, operating margin of 13-15%, free cashflow of £2.8-£3.1 billion and a return on capital of 16-18%.
Erginbilgic said the firm is “at a pivotal point in its history”, adding that "we are setting compelling and achievable financial targets for the mid-term".
By 2027, the firm expects operating margins in Civil Aerospace to improve to 15-17% from 2.5% in 2022, in Defence to 14-16% from 11.8% and in Power Systems to 12-14% from 8.4% in 2022.
Rolls-Royce said its focused strategy has identified investment priorities, partnership opportunities and supports a £1-£1.5 billion disposal programme over next five years.
“We will only sell assets at the right time and at the right price,” it said, adding that it is looking at options at Rolls-Royce Electrical while Advanced Air Mobility would “represent good value to a third party”.
It plans to focus on its core electrical engineering activities in Power Systems, Defence and Civil Aerospace.
Across all of its businesses, the firm expects to deliver sustainable savings of £400-£500 million in the mid-term.
Rolls said current trading is in line with expectations and guidance for 2023 was reconfirmed.
Engine flying hours for large civil engines on long-term service agreements were 86% of 2019 levels for the 10 months to end of October and in line with the group's expectation for 80-90% for the full year.