Shares of British aerospace giant Rolls-Royce hit a historic high on Thursday after the company announced better-than-expected financial results for 2024, along with an optimistic outlook for the years ahead. The firm reported a 57% increase in operating profit, reinstated a shareholder dividend, and unveiled a £1 billion share buyback program, sending its stock soaring by as much as 19.4%.
Record-Setting Financial Performance
Rolls-Royce, renowned for manufacturing jet engines for commercial aircraft as well as power systems for ships and submarines, revealed 2024 operating profits of £2.46 billion, far exceeding analyst expectations. This marked a significant improvement from the previous year, driven by robust delivery performance and improved contract terms.
The company attributed its stellar performance to a successful transformation strategy initiated by CEO Tufan Erginbilgic, who took over in 2023. Upon assuming leadership, Erginbilgic famously referred to Rolls-Royce as a “burning platform,” highlighting the urgent need for operational and financial reform to ensure the company’s survival.
Rolls-Royce has since surpassed its mid-term targets two years ahead of schedule. The firm now anticipates operating profits to rise further, projecting between £3.6 billion and £3.9 billion over the mid-term.
Shareholder Rewards and Market Reaction
Investors welcomed the news with enthusiasm. Rolls-Royce declared a dividend of 6 pence per share, reinstating payouts after a five-year hiatus. Additionally, the company announced a £1 billion share buyback program, which will be carried out over the course of 2025.
As a result, Rolls-Royce shares surged, reaching a fresh all-time high and topping the pan-European Stoxx 600 index. Analysts at Citi described the company’s full-year results as “very strong,” further bolstering investor confidence.
Supply Chain Challenges and Industry Outlook
Despite its impressive results, Rolls-Royce acknowledged ongoing challenges, particularly in supply chain management. CFO Helen McCabe noted that supply chain disruptions remain a significant concern for the company and the broader industry, with volatility expected to persist for another 12 to 18 months.
McCabe also emphasized the company’s commitment to safety, calling it a top priority alongside resolving supply chain issues.
Additionally, Rolls-Royce welcomed the U.K. government’s recent pledge to increase defense spending to 2.5% of GDP by 2027, describing it as a positive development for national security and the company’s defense division.
Continued Transformation and Growth
The company’s transformation journey, now two years underway, has been pivotal in repositioning Rolls-Royce for long-term success. McCabe highlighted the company’s expanding earnings potential and improving balance sheet as key indicators of progress.
“We are two years into a multi-year transformation journey, and we’ve made significant progress,” McCabe. “It’s a culmination of us following through on our promises.”
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