Rolls-Royce (OTC:RYCEY) has seen a remarkable turnaround in its financial performance, with its share price more than doubling over the course of 2021, following a strategic plan initiated by former CEO Warren East and carried forward by current CEO Tufan Erginbilgic. The company, once described as a "burning platform," has transformed into a profitable venture, with significant contributions from both the civil aerospace and defense sectors.
The company recently reported underlying H1 revenues exceeding forecasts at £6.95 billion ($9.12 billion), and operating profits reaching £673 million ($881 million). This performance led to an increase in the annual underlying profit projection from £800 million-£1 billion ($1.05 billion-$1.31 billion) to £1.2 billion-£1.4 billion ($1.57 billion-$1.83 billion). Pre-tax profits hit £524 million ($687 million), and operating margins tripled to 9.7%.
Revenues from the civil aerospace and defense sectors were particularly strong, contributing £3.26 billion ($4.27 billion) and £1.9 billion ($2.49 billion), respectively, to the company's overall performance.
In line with this turnaround strategy, Rolls-Royce announced a strategic review that will result in a workforce reduction of between 2,000 and 2,500 employees. Additionally, procurement will be streamlined into an enterprise-wide process, and engineering technology and safety will be merged into one division.
Chief Technology Officer Grazia Vittadini is set to leave the company in April 2024 as part of these changes.
Despite carrying a net debt of £2.85 billion ($3.74 billion), down from £3.25 billion ($4.26 billion) last year, Rolls-Royce is focused on regaining its investment grade status. The company has received ratings upgrades from S&P, Moody's (NYSE:MCO), and Fitch, with its long-term issuer default rating upgraded to BB with a positive outlook.
The company is expected to reveal its future plans and medium-term financial targets at the Capital Markets Day on November 28th.
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