Rolls Royce share price soars after upbeat 2020 outlook despite coronavirus threat
Shares in the engineering group continue to rise this week after it delivered a promising 2020 outlook despite the coronavirus threat and ongoing issues with its Trent 1000 engine eating into profits.
Rolls-Royce has seen its share price climb 9% higher after delivering a strong set of full-year results last week and a positive outlook for 2020 despite the coronavirus threat.
The engineering group increased its operating profit by 25% to £808 million, driven primarily by its civil aerospace division, which delivered record engine deliveries in 2019. Meanwhile, revenues rose 7% to £15.5 billion and the free cash flow increased by 53% to £873 million.
Despite delivering a strong performance in its full-year results, Rolls-Royce reported a loss of £852 million due to ongoing issues with its Trent 1000 engine.
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‘After a challenging first half, we had a good end to 2019, delivering 25% growth in full year underlying operating profit and an encouraging level of free cash flow,’ Rolls-Royce CEO Warren East said. ‘Our restructuring efforts gained momentum, with run-rate cost savings of £269m.’
‘We made further progress on the Trent 1000; cash costs are in line with guidance,’ he added. ‘We remain on target to reduce aircraft on ground to single digits by the end of Q2 2020.’
Earnings per share remained flat year-on-year at 11.7p.
Rolls-Royce is trading at £6.40 a share as of 12:55 (GMT) on Tuesday.
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Rolls-Royce hopes to navigate COVID-19 outbreak
Rolls-Royce hopes to carry the momentum it gained in 2019 forward into 2020, with the engineering group looking to improve OE losses, grow aftermarket cash flow and control indirect costs, while investing in research and development to drive future growth.
However, the company admitted that there are macro risks to navigate this year, namely the outbreak of COVID-19, though Rolls-Royce’s 2020 guidance remains unchanged despite its concerns.
Core operating profit growth is expected to be around 15%, with at least £1bn of free cash flow (FCF) in 2020, as the company looks to exceed £1 per share of FCF – or at least £1.9bn – in the mid-term.
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