Rolls-Royce shares soar on upbeat profit forecasts
Rolls-Royce has continued its remarkable resurgence, raising its profit forecasts and restoring shareholder payouts, in a half-year results statement that sent the engine-maker’s shares roaring to their highest level in more than a decade.
Revenues climbed by 19% to £8.2bn, boosted by the post-Covid recovery in civil aerospace, while pre-tax profit almost doubled from £524m to £1bn when stripping out exchange rate effects.
The group also rewarded its investors with the return of its dividend, which has been suspended since the onset of the pandemic.
It said shareholders could expect a payout equal to 30% of underlying profit after tax, potentially rising to 40%.
The chief executive of Rolls-Royce, Tufan Erginbilgiç, who has presided over a rapid turnaround in the company’s fortunes since joining in 2023, had previously expressed a desire to restore the dividend as soon as possible.
But the windfall for investors is likely to be larger than expected, after the company raised its guidance for full-year profits to between £2.1bn and £2.3bn on an underlying basis.
Shares in Rolls-Royce soared by more than 8% to 486.7p in early trading on Thursday, their highest watermark since 2013 and the fastest climber of the day on the FTSE 100.
Erginbilgiç described the company as a “burning platform” when he took over.
While the company’s recovery was tentatively under way when he arrived, the Turkish and British national has earned the nickname “Turbo Tufan” among City analysts impressed by the speed of cost-cutting measures. The savings plan includes the loss of 2,500 jobs.
“Our transformation of Rolls-Royce into a high-performing, competitive, resilient, and growing business is proceeding with pace and intensity,” Erginbilgiç said on Thursday. “These results and our increased financial resilience give us the confidence to raise our 2024 guidance and reinstate shareholder distributions in respect of the full-year 2024 results.”
Analysts at the stockbroker Jefferies said Rolls-Royce’s numbers represented “over-deliveries on an already high bar”.
The biggest contributors to halfyear performance have been the group’s civil aerospace division, helped by the rebound in global aviation, and its defence operation, which analysts said benefited from global military tensions.
Rolls-Royce said it was making more money from “after-market” services in combat, which include servicing and maintenance of aircraft engines. It has also benefited from the
Aukus submarine-building partnership between the US, US and Australia.
The company is moving closer to making small modular reactors, known colloquially as mini-nukes, a reality in Britain, with “first power” from the reactors expected in the early 2030s.
Rolls-Royce has completed the second phase of the regulatory process required to roll out the small-scale nuclear power stations. “Rolls-Royce is the only European company to have reached this milestone, adding to our competitive advantage,” it said.