Rolls-Royce has said it will return £1.5bn to shareholders as the British jet engine manufacturer paid its dividend for the first time since the Covid pandemic.
The FTSE 100 company announced on Thursday its underlying operating profits rose 55% in 2024 to £2.5bn, as it upgraded its guidance for future earnings.
Rolls-Royce made underlying sales of £17.8bn during the year, up 15% compared with 2023. It generated £2.4bn in cash, almost double the previous year.
Its share price soared by 16% on Thursday to £7.39, a record high. The move made it the top riser in the FTSE 100.
The manufacturer, which has operations ranging from civil aviation to fighter jet engines and nuclear reactors for submarines, was forced to raise billions of pounds in emergency funding during the pandemic as long-haul air travel ground to a halt.
The company survived the existential scare but it appointed Tufan Erginbilgiç to take over as chief executive in 2023 with a mandate to raise its valuation. His efforts to charge customers more coincided with the recovery of air travel and the prospect of increased spending on defence after Russia’s full-scale invasion of Ukraine.
The company’s valuation has soared nearly eightfold during his tenure, propelling Rolls-Royce past BAE Systems as Britain’s most valuable manufacturer. Erginbilgiç said there was more to come, with improvements that would generate further cash for the next decade.
In 2024, the number of hours flown by Rolls-Royce engines on passenger jets surpassed 2019 levels for the first time. The company supplies engines for Airbus’s larger, twin-aisle planes, as well as to Boeing’s twin-aisle 787, but it is also considering a return to the lucrative market for jet engines on single-aisle planes.
Erginbilgiç said the company would meet operating profits targets set in late 2023 this year, two years early. That was despite a warning that supply chain disruptions, which cost it up to £200m during the year, could persist for a further 18 months. The supply chain problems had affected the Trent 1000 engine used in Boeing’s 787 planes, and Erginbilgiç said titanium supplies had also been a problem.
He also said he welcomed the UK government’s decision to raise defence spending to 2.5% of GDP. That move could benefit Rolls-Royce in the future through spending on the UK’s joint fighter jet programme with Japan and Italy, the Aukus nuclear partnership between Australia, the UK and the US, and the UK’s own nuclear-powered submarine fleet.
He was also lukewarm about the possibility of the fighter jet programme, known as the global combat air programme (GCAP), working with a rival effort led by France and Germany. Airbus bosses have pushed for the two to merge, or else at least work closely together, but Erginbilgiç touted Rolls-Royce’s jet engine abilities, which he said were unique in Europe, combined with BAE Systems’s experience.
“I think GCAP is a lot better positioned, frankly, than the other programme,” he said. “That’s my view.”
Part of the uncertainty that has pushed the UK to increase military spending – at the expense of international aid – has come from Donald Trump. The US president and his senior adviser Elon Musk, the billionaire Tesla boss, have said they will target defence spending. Erginbilgiç said Rolls-Royce had had no indications that its work for the US would be affected.
Erginbilgiç said the company was able to make the shareholder payouts because of a “significantly improved performance and a stronger balance sheet”. It came 18 months after he announced 2,500 job cuts, mostly from management.
The chief executive defended the payouts, saying that successful companies needed to reward investors in order to be able to attract more investment in the future.
“If that’s not the case, you don’t shape your destiny,” he said. “How are you going to be a financially strong company if you don’t give back some of the investment that investors are making?”
The dividend will be worth 6p a share, or about £500m, to be paid in June 2025. That was combined with a £1bn share buyback.
Erginbilgiç said the company would aim to increase its underlying operating profit to between £3.6bn and £3.9bn by 2028.
After taking on heavy debts during the pandemic, Rolls-Royce said it had by the end of 2024 returned to a net cash position of £475m.
