Britain’s Rolls-Royce hits record high as midterm goals raised

London — Britain’s Rolls-Royce lifted its midterm targets to reflect its confidence in future profit growth after a plan to improve engines and cut costs helped its results beat expectations, pushing its shares up 15% on Thursday.

The upgrade showed the progress made by Rolls-Royce over the last two years after former BP executive Tufan Erginbilgic took over as CEO, describing the company as a “burning platform” in need of a fundamental turnaround.

Shares in Rolls-Royce surged to 726 pence, an all-time high.

In its results statement, the group also announced a dividend of 6 pence per share, having flagged in August that it would reinstate a payout after a five-year pandemic break, and launched a £1-billion share buyback.

Citi called the results “very strong” while Richard Hunter at Interactive Investor said the unexpected share buyback was “lighting a fire under the shares”.

“Strong 2024 results build on our progress last year, as we transform Rolls-Royce into a high-performing, competitive, resilient, and growing business,” Erginbilgic said in a statement.

Rolls, Airbus’s exclusive engine partner on its wide-body planes and a supplier to Boeing's 787, said profits had been boosted by cost-savings, as well as tweaks to ensure engines can fly for longer before maintenance, and improved contract terms.

The company, which also powers ships, submarines and makes power generation systems, said it would meet its previous midterm targets this year, two years earlier than planned, and was now guiding to midterm underlying operating profit of £3.6bn to £3.9bn.

Profit for this year is expected to be between £2.7bn and £2.9bn, Rolls said, and compared to the £2.46bn it posted last year, comfortably ahead of a consensus forecast, and up 55% on last year.

Over the last year, London’s blue-chip index has risen 13%, while Rolls-Royce has doubled in value. Since Erginbilgic joined in January 2023, its shares have risen more than five-fold.

Reuters