Rolls-Royce (OTC:RYCEY) has unveiled a bold transformation plan aiming to significantly boost its financial performance by 2027. The British engineering giant is targeting an operating profit of £2.5 billion to £2.8 billion and free cash flow between £2.8 billion and £3.1 billion. This strategy is part of a comprehensive programme announced by CEO Tufan Erginbilgic at the company's Capital Markets Day event earlier today.
The company's roadmap to 2027 includes a series of strategic initiatives designed to optimize its operations and financial health. Rolls-Royce plans to focus on key areas such as core investments, strategic partnerships, and a phased divestment process that could generate up to £1.5 billion over the next five years.
In terms of operational sectors, the Civil Aerospace division is set to see a significant margin increase from last year's 2.5% to a projected 15%-17%. This growth is expected to be driven by the Trent and Pearl engines and the advancement of the UltraFan engine programme, which may include new partnerships in the single-aisle airliner engine market.
The Defence division is also poised for growth, with margins expected to improve from 11.8% to a range of 14%-16%. This will be supported by investments in Combat and Transport sectors, AUKUS-related submarine projects, and leveraging the company's nuclear reactor expertise into the small modular reactors (SMR) market.
Rolls-Royce's Power Systems division is not to be left behind, with a goal to lift margins from 8.4% to between 12%-14%. The focus here will be on power generation and exploring joint ventures in battery energy storage systems.
Erginbilgic emphasized that these ambitious financial targets are set not just for shareholder profit but also to benefit employees, customers, and partners. The CEO projects that this strategy will place Rolls-Royce on a trajectory to surpass any of its previous financial performances, marking a new era of growth and profitability for the company.
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