It has been an up and down couple of days for investors in Rolls-Royce PLC (LON:RR.), the aero-engines maker.
Monday saw a heavy sell-down of the stock after it cautioned that its £1bn free cash flow target was less a firm goal than a long-term aspiration.
Those who bailed out on the back of the bad news will have rued their luck as the stock bounced back 10% on Tuesday following better than forecast interim results – more than covering earlier losses.
It appears the City has declared the turnaround at Rolls, which has suffered in a difficult market as well as from some self-inflicted wounds, is now underway.
Pointedly, the company didn’t appear to share the Square Mile’s confidence as it said it wouldn’t be upgrading its guidance. But, hey, that point seemed to be largely overlooked by London traders.
READ: Rolls-Royce unsettled by news of FRC accounts probe; AGM update reveals outlook unchanged
Rolls underlying profits up strongly
Earlier it said the civil aviation market and demand for large power units helped drive revenues 6% higher to £7.56bn in the six months ended June.
Last year’s numbers marked the nadir for the company after it booked a record loss following a £671mln settlement with regulators for past bribery and corruption.
The engineer, which is in the middle of a turnaround under chief executive Warren East, said restructuring savings from this process were well “ahead of plan”.
No room for complacency, says boss
The Rolls boss added: “Two years ago we set out a programme of change to drive efficiency and sharpen our focus on execution.
“Our strengthened management team is making good progress in simplifying the organisation and driving the pace of necessary change to develop a more resilient and sustainable business. However, this is no time for complacency.”
The interim pay-out is being held at 4.6p a share.
At 3pm the shares were changing hands for 971.49p, up 9%.
The results beat blue-chip broker UBS’s forecasts on almost every count. It rates the stock ‘buy’.