New Rolls-Royce boss launches strategic review despite profits rise

theguardian.com:

The new boss of Rolls-Royce has launched a sweeping review of the aircraft engine maker pledging there was “much more” to come after last year beat expectations, sending shares up nearly 20%.

Tufan Erginbilgic, who joined as chief executive 1 January, said the FTSE 100 manufacturer had been “underperforming financially for years” and outlined key areas for reform that he said would deliver “materially higher profit, cashflows and returns”. It followed his warning to employees last month that Rolls-Royce is a “burning platform” that must transform to survive.

Erginbilgic pledged to do better even as the company reported a 57% increase in underlying profits to £652m, £505m generated in cash, and revenues up 16% to £12.7bn in 2022 – well above analysts’ expectations.

Rolls-Royce shares rose by nearly 18%, hitting 129p on Thursday morning, their highest level for over a year as investors welcomed the stronger-than-expected recovery. The company, which earns maintenance revenues depending on the hours flown by the engines it makes, said engine flying hours were at 65% of pre-pandemic 2019 levels, and were expected to rise to 80-90% of 2019 levels this year thanks to the easing of travel restrictions in China.

The pandemic presented a serious threat to Rolls-Royce as revenues from its civil aerospace business dried up. Yet Erginbilgic, who replaced the retiring Warren East, said Rolls-Royce had serious problems before Covid-19 struck, and outlined plans to increase the company’s profitability.

Erginbilgic, previously a senior executive at oil company BP, raised the prospect of big changes at the company, including announcing a review of where to invest in the future and potential changes to “footprint” that will probably raise