A model of an UltraFan on the Rolls-Royce Holdings Plc stand on day two of the Farnborough International Airshow in Farnborough, UK, on Tuesday, July 23, 2024.
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British aerospace group Rolls-Royce on Thursday posted stronger-than-expected full-year earnings, upgraded its mid-term guidance and declared a £1 billion ($1.27 billion) share buyback.
Rolls-Royce, which manufactures jet engines for commercial aircraft along with power systems for ships and submarines, reported 2024 operating profit of £2.46 billion, beating analyst expectations and reflecting an increase of 57% from the year prior.
The company said robust delivery in 2023 and 2024 enabled it to meet its mid-term targets this year, two years ahead of schedule, before adding that it now expects operating profit to increase to between £3.6 billion and £3.9 billion over the mid-term.
Rolls-Royce also announced a dividend of 6 pence per share, reinstating the payout after a five-year break, and said a £1 billion share buyback would be completed over the course of 2025.
Analysts at Citi described the full-year results as “very strong.”
Shares of Rolls-Royce surged as much as 19.4% on the news, notching a fresh all-time high and hitting the top of the pan-European Stoxx 600 index.
“We are two years into a multi-year transformation journey [and] we’ve made significant progress,” Helen McCabe, CFO of Rolls-Royce, told CNBC’s “Squawk Box Europe” on Thursday.
“It’s a culmination of us following through on our promises,” McCabe said, citing the engine-maker’s expanding earnings potential and improving balance sheet.
Supply chain disruption
Rolls-Royce said its 2024 profits were boosted by robust performance in business aviation and by improved contract terms.
The earnings reflect the firm’s transformation progress since former BP executive Tufan Erginbilgic took the reins as CEO in January 2023. At the time, Erginbilgic described the company as a “burning platform” that needed to change the way it operated to survive.
Rolls-Royce’s McCabe said Thursday that the company welcomed the U.K. government’s recent pledge to increase defense spending to 2.5% of gross domestic product (GDP) from April 2027, describing the commitment as “great for U.K. security.”
Looking ahead, McCabe said the two biggest risks for the firm were safety and supply chains.
“There are two things that we continually worry about at the minute. Safety, it is our job to always have safety at the forefront of our mind,” McCabe said.
“And then, as you mentioned earlier, supply chains. It is causing so much disruption across the whole industry, and it is quite volatile,” she added.