Rolls-Royce Holdings PLC (LSE:RR.) will report tomorrow on a year that saw the manufacturer rise from the ashes to become the FTSE 100’s biggest gainer.
Indeed, the report will come just over a year after chief executive Tufan Erginbilgic equated Rolls-Royce to a “burning platform” on his arrival at the company.
Since then, investors have enjoyed a tougher stance on airline engine contracts from Rolls-Royce, a restructuring effort promising to improve productivity and ultimately a boost from a return of global flying trends to near pre-pandemic levels.
Rolls-Royce guided for full-year underlying operating profit between £1.2 billion and £1.4 billion and free cash flow of £900 million to £1 billion in August’s interims.
So, what else can be expected from the update?
Civil aerospace improvements
According to Hargreaves Lansdown’s Susannah Streeter, margins within Rolls-Royce’s civil aerospace wing will be in full view.
This will be as part of a wider focus on the manufacturer’s mid-term operating margin targets, she said, with the underlying figure sitting at 9.7% at the half-year.
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For the company’s civil wing, investors will want to see Rolls-Royce on track to hit underlying margins of between 15% and 17% over the medium term, Streeter added.
Engine flying hours
According to trackers, long-haul flying hours still sit off pre-pandemic flying times, with the metric key for Rolls-Royce given payments heavily rely on the amount its engines are used.
Rolls-Royce engines flew the equivalent of 83% of pre-pandemic hours over the first half of the year, with analysts tipping the final figure for 2023 could be above 90%.
The company itself guided for the figure to sit between 80% and 90% for the year in August.
“Investors will want to see further progress here,” according to Streeter.
“Pent-up demand for travel, which is still spinning out into super-strong airline bookings, is a positive tailwind for Rolls Royce.
“A huge amount of its revenue comes from servicing engines for larger long-haul planes.”
Further disposals
Sales of some £1.5 billion worth of Rolls-Royce’s assets could be in the pipeline per Erginbilgic’s wider ongoing turnaround plan.
Any further updates on disposals therefore may be keenly awaited by the market, as the manufacturer continues to simplify its operations.
Rolls-Royce had previously announced the sale of its off-highway engines business to German group Deutz in December as part of such plans to double down focus on higher-power units.
"This is a clear illustration of our strategy in action,” Erginbilgic said at the time, “becoming more focused on the markets where we know Rolls-Royce can win”.