New Rolls Royce boss says more to come after profit beat

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The new chief executive of Britain's Rolls-Royce (RR.L) forecast more profit growth in 2023 and said the engineering company was capable of "much more" after last year beat expectations, sending the stock up 19 percent.

Tufan Erginbilgic, who is just two months into the job, has said that major improvements are needed to secure the future of Rolls-Royce, one of Britain's most famous industrial names, which makes engines for Airbus A350 and Boeing 787 planes.

As Rolls-Royce announced a 57 percent rise in underlying operating profit on Thursday, he said his transformation program was already underway and moving at pace.

"While our performance improved in 2022, we are capable of much more," Erginbilgic, a former BP (BP.L) executive, said, promising to improve efficiency and commercial outcomes.

The strong results and the positive outlook helped lift Rolls shares by 19 percent to 129 pence in early deals, their highest level for over a year.

The company posted operating profit of 652 million pounds ($786.4 million) for 2022, beating an analyst forecast of 478 million pounds, helped by an improving performance in civil aerospace, its biggest division, as travel recovers from the pandemic.

The outcome of a strategic review would come in the second half of the year, Rolls said, when it planned to provide medium-term goals, as the new boss seeks to put his stamp on the company.

For 2023, Rolls guided to underlying operating profit of 0.8-1.0 billion pounds and free cash flow of 0.6-0.8 billion pounds, helped by the early benefits of the transformation.

Rolls-Royce's underperformance versus peers such as engine-maker GE (GE.N) has been a longstanding issue.

Warren East, Erginbilgic's predecessor, had tried to lift profitability, launching a turnaround in 2018, before the pandemic two years later forced another restructuring, this time to rescue it from the collapse in revenues when flying stopped.

Ahead of Thursday's results Rolls-Royce shares had risen 15 percent since Jan. 1, boosted by the prospect of its engines flying more hours now China has reopened its borders.