Shares in Rolls-Royce Holdings PLC (LSE:RR.) rose 7% to 259.9p, their highest in four years, as the engine-maker set out new 2027 financial targets and announced plans for £1-1.5 billion of disposals over the next five years.
Chief executive Tufan Erginbilgic, who was appointed at the start of the year, said the aim was to make the group “financially stronger and more resilient”.
Operating profit of £2.5-£2.8 billion is the target, at an operating margin of 13-15%, with free cashflow of £2.8-3.1 billion and a return on capital of 16-18%.
Analysts at UBS said the targets are "slightly ahead of our materially ahead-of-cons expectations". They noted that at the mid-point, the new targets imply circa 7% upside to the average City forecast for operating profit and at least 30% upside to free cash flow consensus forecasts.
Rolls-Royce said the disposals would not be limited to a single division, though the Electrical business was flagged as one of the targets.
The UBS analysts said the financial targets reflect these disposals, though there was a "slight mismatch in timing", in that the targets are for 2027 while the disposals are over the years from 2024-28.
With Rolls planning to return to investment-grade credit status in the "near-term", the analysts said they were forecasting the start of dividend payments from 2024.
The company said engine flying hours under long-term service agreements with airlines have reached circa 86% of 2019 levels in the 10 months of the year so far.
Full-year guidance was maintained and 2024 guidance was promised along with results in February.