23rd May 2024 11:52
(Alliance News) - A positive trading statement from Rolls-Royce Holdings PLC left investors used to fireworks every time it reports slightly underwhelmed.
"When a share price goes up as much as Rolls-Royce’s, it’s only natural for the momentum to disappear when the company runs out of things to pleasantly surprise the market," AJ Bell's Investment Director Russ Mould commented.
"A trading update that contains no change to full-year guidance has provoked the same reaction as a child receiving a second-hand Nokia phone for Christmas, not the shiny iPhone they wanted. It works fine but doesn't impress."
"Investors don’t want a functional Rolls-Royce just getting on with the job, they want to be amazed every time it reports."
On Thursday, Rolls-Royce said it made a strong start to 2024, despite continued industry-wide supply chain challenges as it continues its transformation with "pace and intensity".
Shares in Rolls-Royce were up 2.2% to 437.30 pence in London on Thursday. They have nearly trebled in the last 12 months.
In a trading update to April 30, ahead of the company's annual general meeting on Thursday, Chief Executive Tufan Erginbilgic said the strong start to the year "builds on our record performance in 2023 and provides further confidence in our guidance for 2024".
"Our work to transform Rolls-Royce into a high-performing, competitive, resilient and growing business is continuing with pace and intensity," he added.
"We are driving growth, delivering contractual improvements and improved margins, unlocking efficiencies and creating value across the group."
Rolls-Royce said full year 2024 guidance is unchanged, with a broadly balanced weighting for both profit and cash flow across the year.
"Our operating profit and cash growth reflects an underlying performance improvement driven by the impact of our strategic initiatives, notably commercial optimisation including contractual improvements, cost efficiency actions, and the effective management of ongoing supply chain challenges," the company stated.
Mould pointed shares rose five-fold between October 2022 and March 2024 making the British engineer "a market superstar."
But, now that the recovery in the business is well underway, "it’s harder to blow the lights out."
"Rolls-Royce is winning new contracts, civil aerospace flying hours are back to pre-Covid levels which benefits its service activities, and the engineer’s balance sheet is looking stronger. That’s laying solid foundations for the future, but just not enough to keep the share price in the fast lane," he added.
By Jeremy Cutler, Alliance News reporter
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