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Rolls-Royce Holdings PLC on Thursday said it is moving with ‘pace and intensity’, as it reinstated its dividend, launched a new share buyback, and delivered better-than-expected annual results.
In response, shares in the London-based aerospace and defence manufacturer soared 15% to 727.70 pence, the top performer in the FTSE 100 index on Thursday morning. They earlier set a 12-month high of 740.00p and have doubled in the past 12 months.
Chief Executive Tufan Erginbilgic said: ‘We are moving with pace and intensity.’
He added: ‘Strong 2024 results build on our progress last year, as we transform Rolls-Royce into a high-performing, competitive, resilient, and growing business. All core divisions delivered significantly improved performance, despite a supply chain environment that remains challenging.’
As a result, Rolls-Royce expects to deliver £2.7 billion to £2.9 billion underlying operating profit in 2025 and £2.7 billion to £2.9 billion free cash flow, delivering the mid-term targets it had set out at a recent capital markets day two years earlier than planned.
Erginbilgic said the ‘significantly improved performance’ and a stronger balance sheet gives confidence to reinstate shareholder dividends and announce a £1 billion share buyback in 2025.
A dividend of 6.0 pence was declared. It is the first since before the Covid pandemic and was ahead of the 5.2p expected by company-compiled market consensus.
Pretax profit fell 8.2% to £2.23 billion in 2024 from £2.43 billion a year prior.
But operating profit rose 50% to £2.91 billion from £1.94 billion with operating margin widening to 15.4% from 11.8%.
Underlying operating profit rose to £2.46 billion from £1.59 billion, ahead of the £2.29 billion company compiled consensus.
Statutory revenue in 2024 increased 15% to £18.91 billion from £16.49 billion. Underlying revenue grew 16% to £17.85 billion from £15.41 billion, beating company compiled consensus of £17.34 billion.
Civil Aerospace’s operating margin rose to 16.6% in 2024 from 11.6% a year prior, driven by higher widebody aftermarket profit, stronger performance in business aviation, and net contractual margin improvements.
Defence delivered an operating margin of 14.2%, improving from 13.8%, with higher operating profit driven by stronger aftermarket performance alongside submarines growth.
Power Systems reported an operating margin of 13.1%, up from 10.4%, primarily driven by stronger performance in power generation.
Free cash flow doubled to £2.43 billion from £1.29 billion.
Looking further ahead, Rolls-Royce increased its mid-term targets.
In 2028, it expects underlying operating profit of £3.6 billion to £3.9 billion, underlying operating margin of 15% to 17% operating margin, free cash flow of £4.2 billion to £4.5 billion free cash flow, and return on capital of 18% to 21%.
‘These mid-term targets are a milestone, not a destination, and we see strong growth prospects beyond the mid-term,’ Erginbilgic remarked.
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