Rolls-Royce shares have surged after the enginebuilder released robust trading numbers for 2024, and announced a resumption in dividend payments from this year.
At 729p per share, the FTSE 100 company was last up 15.5% in Thursday trading.
Statutory revenues rose improved 14.7% over the course of 2024, to £18.9 billion, while on an underlying basis they grew 15.8% to £17.8 billion.
Operating profit, meanwhile, soared 49.5% and 55% on a reported and underlying basis respectively, to £2.9 million and £2.5 billion.
Rolls’ underlying operating margin came in at 13.8%, up from 10.3% in 2023.
Dividends Return, Buyback Announced
Rolls-Royce’ transformation has also prompted a further significant improvement in the balance sheet, it said.
Free cash flow almost doubled over the course of the year, to £2.4 billion from £1.3 billion previously. Strong cash flows helped the firm swing to a net cash position of £475 million from having net debt of £2 billion in 2023.
Rolls said its robust free cash flow “was driven by strong operating profit and continued net long-term service agreement (LTSA) balance growth, alongside a working capital release and higher net investments in the year.”
Reflecting its improved financial position, Rolls announced it would pay a full-year dividend of 6p per share. This is the first cash reward since 2019, before the Covid-19 crisis forced the mass grounding of the world’s commercial airlines.
The FTSE firm also announced a £1 billion share buyback programme “to commence immediately for completion through 2025.”
Since Tufan Erginbilgic became chief executive in January 2023, Rolls has undertaken widescale restructuring to boost cash flows and margins. It’s also benefitted from a strong post-pandemic recovery in the global airline sector, boosting engine flying hours.
Targets Brought Forward
Erginbilgic said that the firm’s “strong 2024 results build on our progress last year, as we transform Rolls-Royce into a high-performing, competitive, resilient, and growing business.”
He added that “all core divisions delivered significantly improved performance, despite a supply chain environment that remains challenging.”
For 2025, Rolls said it expects underlying operating profit to range between £2.7 billion and £2.9 billion. Free cash flow is also predicted at between £2.7 billion and £2.9 billion.
The business said that supply chain issues are likely to dent this year’s free cash flow by £150 million to £200 million. It added that “we expect supply chain issues to persist for a further 12-18 months.”
Erginbilgic said that “based on our 2025 guidance, we now expect to deliver underlying operating profit and free cash flow within the target ranges set at our Capital Markets Day, two years earlier than planned.”
Rolls now predicts medium-term underlying operating profit of £3.6 billion to £3.9 billion, and free cash flow of between £4.2 billion and £4.5 billion.
City Pleased
Discussing Rolls-Royce’s results, Mark Crouch of eToro commented that “the aerospace and defense giant did not disappoint… Rolls-Royce’s civil aerospace division, which accounts for over 50% of its business, has soared, as demand for engines has taken off, with airline passenger numbers continuing to grow, leaving the nightmare that was the pandemic in its wake.”
He added that “defense has also proven strong as Rolls-Royce announces they are expanding their submarine facilities in Derby, further boosted by the UK government’s newfound commitment to increasing defense spending.”