Rolls-Royce shares hit a four-year high as it looks to more than quadruple profits in five years.
Chief executive Tufan Erginbilgic, who took over at the engineering giant in January, vowed to deliver profits of up to £2.8billion by 2027.
This is more than four times the £652million it made last year and double what it expects to make this year.
As part of his blueprint for the company, former BP executive Erginbilgic plans to dramatically fatten the margins at its main civil aerospace business from 2.5 per cent last year to as much as 17 per cent by 2027.
Rolls-Royce shares soared 6.2 per cent, or 15.1p, to 258.3p.
Target: Rolls-Royce chief exec Tufan Erginbilgic (pictured), who took over at the engineering giant in January, vowed to deliver profits of up to £2.8bn by 2027
That was the highest level since November 2019 before Covid struck, leaving Rolls-Royce fighting for survival.
The stock has risen almost 180 per cent so far in 2023 – putting the group on track for its best year since its 1987 public listing and making it the biggest riser on the FTSE 100.
‘We are setting compelling and achievable financial targets for the midterm which will take Rolls-Royce significantly beyond any previous financial performance,’ Erginbilgic said.
‘The company is going to be able to do things that Rolls-Royce couldn’t do before.’
Rolls-Royce, which builds and maintains large engines for aircraft, has previously sacrificed profitability to boost sales in the highly competitive engine aircraft market.
The targets bring the Derby-based firm closer in line with rivals such as General Electric.
Soon after taking over, Erginbilgic described Rolls-Royce as a ‘burning platform’ that needed to cut debt and invest for the future.
The company, whose engines power nearly half of long-haul aircraft, including the Airbus A350 and rival widebody Boeing 787, endured a rocky period during the pandemic when travel was brought to a virtual standstill.
Erginbilgic, 64, has said the group will be seeking annual savings of up to £500million after announcing plans to cut up to 2,500 jobs last month.
The redundancies of up to 6pc of its workforce affect non-engineering roles and are designed to make the overall firm more efficient, bosses have said.
But Rolls-Royce also revealed yesterday it would be selling parts of the business with the aim of raising between £1billion and £1.5billion over the next five years.
This will mean getting rid of its electric aircraft division, which has been used to develop systems for flying taxis.
However, Erginbilgic said the company will be re-entering the market for engines for smaller ‘narrowbody’ passenger jets, such as the Airbus A320 and Boeing 737.
It stopped making these in 2011 but is on the hunt for manufacturing partners as appetite for short-haul getaways continues to boom.
And in its defence division, which makes engines for fighter jets and power systems for nuclear submarines, Rolls-Royce wants to use its atomic power to develop more products.
Summing up his plans for the group, Erginbilgic said he wanted to create a company that was ‘high performing, growing, competitive and resilient’.
He added: ‘Frankly Rolls-Royce has never been any of those four. With the mid-term targets we’ve set we’ll reach them.
That will unlock new opportunities and we will continue to grow, therefore these targets are not a destination, it’s an important milestone.’
Russ Mould, investment director at AJ Bell, said: ‘For “Turbo” Tufan it is all about backing up his words with action and he has set himself some clear parameters on which his tenure of the company can be judged.’
