Rolls-Royce Holdings PLC (LSE:RR.) boss Tufan Erginbilgic has well and truly delivered on his promise to turn the company around, according to analysts.
Following the company’s report of better-than-expected £1.6 billion full-year profit, eToro’s Adam Vettese said it may well not be long before the engine maker fires up its dividend payments once more.
FTSE 100-listed Rolls-Royce has forgone any dividend payments since the pandemic struck in 2020.
Indeed, Covid-19 hit the business hard, grounding large swathes of the global aviation industry and leaving Rolls-Royce as the loss-making, ‘burning platform’ slated by Erginbilgic upon his arrival in early 2023.
However, with net debt having fallen from £3.3 billion to £2.0 billion over the year and free cash flow expected to climb as high as £1.9 billion in 2024, from a record of £1.3 billion, Vettese attributed Erginbilgic with the “turnaround of the century”.
“We are seeing no let-up in demand in civil aviation as well as defence spending,” he said, “both areas in which Rolls-Royce has a strong foothold”.
Commenting on Rolls-Royce’s guidance, he added: “If this comes to fruition, then it won't be long before the dividend is back also.”
UBS analysts reiterated backing for Rolls-Royce following the update, meanwhile.
Noting earnings beat expectations across all of the company’s divisions, the bank repeated a share price target of 400p - up 21% on Wednesday’s close.
“There is strong evidence the turnaround continues,” UBS added, highlighting an expected return to pre-pandemic long-haul flying hours over the coming year.
Given Rolls-Royce's exposure to the wide-body aircraft market, such a recovery would boost payments from usage of its engines, alongside shop visits from airlines.
That said, Rolls-Royce highlighted November’s successful testing of its UltraFan engine in Thursday’s results, with the scalable power unit previously being labelled as a potential offering for the booming narrow-body, short-haul market come the 2030s.
Shares jumped 11.8% to 368.30p.