Rolls-Royce’s Turkish Chief Executive Tufan Erginbilgiç has lived up to his nickname ‘Turbo Tufan’ by spearheading the company to more than double its annual operating profit to £1.6bn.
The figures for 2023 are up from £652 million a year earlier, far exceeding the company’s own forecasts of between £1.2 billion and £1.4 billion.
Its return on capital more than doubled to 11.3% as a result of “improved operating profit, disciplined capital allocation and working capital management”. The result marks the company’s first double-digit return on capital since 2017.
The Derby-headquartered company also cut its net debt from £3.3bn to £2bn following a £1bn increase in statutory free cash flow to £2.5bn.
Just 12 months into his role as CEO, Erginbilgiç’s stunning impact on the business has propelled the world-famous engine maker to the top of the FTSE 100 on Thursday as shares rose by 9% to 360p following the announcement.
The company’s press release stated the 2023 performance reflected the impact of its “strategic initiatives”, along with “commercial optimisation” and “cost efficiencies” across the Group.
Commenting on the progress, Erginbilgiç said: “Our transformation has delivered a record performance in 2023, driven by commercial optimisation, cost efficiencies and progress on our strategic initiatives. This step-change has been achieved across all our divisions, despite a volatile environment with geopolitical uncertainty, supply chain challenges and inflationary pressures.”
“We are managing the business differently and our significant performance improvement in the year reflects the hard work and focused actions of all our teams. We are also continuing to invest to drive future sustainable growth,” he added, continuing, “Our strong delivery in 2023 gives us confidence in our 2024 guidance and is a significant step towards our mid-term targets. We are unlocking our full potential as a high-performing, competitive, resilient, and growing Rolls-Royce.”
Erginbilgiç had compared Rolls-Royce to “a burning platform” when he was appointed CEO in July 2022, and the company’s change in fortunes since he formally started in January 2023 has been hailed as “exceptional” by City analysts.
Aviation sector and large Turkish Airlines engine order helps bounce back
The tough-taking CEO’s turnaround plan has been aided by the civil aviation sector returning to near normal after three years of the pandemic. Erginbilgiç told investors that flying is back at 88% of pre-Covid levels, up from 65% in 2022.
The annual report shows that large aero engine orders in 2023 were the highest in more than 15 years, with Air India and Turkish Airlines both placing major orders. In December 2023, Rolls-Royce announced that Turkish Airlines had ordered 100 Trent XWB-84 engines and 40 Rolls-Royce Trent XWB-97 engines, making Turkish Airlines “the world’s largest operator of Trent XWB engines.”
The recovery of commercial aviation has helped boost the coffers given that the more Rolls-Royce’s Trent-branded engines are in the air, the more money it is paid.
Rolls-Royce produces engines for planes, submarines and ships, along with power generation systems, and the company’s full year results for 2023 showed strong growth in all its divisions.
One of the star performers was the defence division, with a reported order intake of £5.2 billion, delivering “double digit growth in combat and submarines”.
Erginbilgiç maintains that the company’s transformation remains a work in progress and that there is “no silver bullet” to restoring Rolls-Royce to full glory. He also warned that supply chains were expected “to remain challenging for another 18 to 24 months”.
Rolls-Royce Plc currently has over 22,000 employees across seven sites in the UK, from Scotland to Bristol, and have recently opened or expanded several new manufacturing and research centres. Globally, the company has a presence in 48 countries and its total workforce is nearly 42,000 strong.
