Rolls-Royce Plans Higher Cash Flow as CEO Pushes Efficiency

(Bloomberg) -- Rolls-Royce Holdings Plc set ambitious medium-term targets of higher cash flow and return on capital as Chief Executive Officer Tufan Erginbilgic takes his turnaround effort at the UK engine maker to the next phase.

The company expects to achieve operating profit of as much as £2.8 billion ($3.5 billion) and free cash flow of as much as £3.1 billion by 2027 — more than triple the amount set for this year. Return on capital will be as high as 18% by then, it said in a stock exchange filing ahead of a meeting with investors and analysts on Tuesday.

The manufacturer will also look to divest assets that don’t meet profitability goals and continue a saving push that will generate as much as £500 million in the mid-term. Rolls-Royce rose as much as 4.8% in London trading, taking this year’s gain to 169%.

Erginbilgic has embarked on an extensive overhaul of the prime UK manufacturer, which he described as a “burning platform” shortly after taking over at the start of this year. The company has said it plans to cut as many as 2,500 jobs, or 6% of worldwide workforce, as the CEO presses ahead with his effort to streamline operations and boost profitability.