27th Feb 2025 09:16
(Alliance News) - 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 GBP2.7 billion to GBP2.9 billion underlying operating profit in 2025 and GBP2.7 billion to GBP2.9 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 GBP1 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 GBP2.23 billion in 2024 from GBP2.43 billion a year prior.
But operating profit rose 50% to GBP2.91 billion from GBP1.94 billion with operating margin widening to 15.4% from 11.8%.
Underlying operating profit rose to GBP2.46 billion from GBP1.59 billion, ahead of the GBP2.29 billion company compiled consensus.
Statutory revenue in 2024 increased 15% to GBP18.91 billion from GBP16.49 billion. Underlying revenue grew 16% to GBP17.85 billion from GBP15.41 billion, beating company compiled consensus of GBP17.34 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 GBP2.43 billion from GBP1.29 billion.
Looking further ahead, Rolls-Royce increased its mid-term targets.
In 2028, it expects underlying operating profit of GBP3.6 billion to GBP3.9 billion, underlying operating margin of 15% to 17% operating margin, free cash flow of GBP4.2 billion to GBP4.5 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.
By Jeremy Cutler, Alliance News reporter
Comments and questions to [email protected]
Copyright 2024 Alliance News Ltd. All Rights Reserved.