Rolls-Royce shares soar after announcing a £1bn buyback and dividend reinstatement.
Rolls-Royce shares surged by 17% on Thursday after the aircraft engine manufacturer reported strong annual results, which included the announcement of a £1 billion (€1.2bn) stock buyback and the resumption of dividend payments for the first time since the COVID-19 pandemic.
The UK-based company’s stock price reached £7.40 (€8.97) per share, reflecting investor confidence in its financial recovery. Rolls-Royce revealed an underlying profit of £2.5bn (€3bn) in 2024, marking a significant 55% increase compared to the previous year. Free cash flow also surged by nearly 90%, reaching £2.4bn (€2.9bn).
Rolls-Royce Announces Dividend and Share Buyback
In a key move to reward investors, Rolls-Royce confirmed that it would pay out a dividend of 6p per share in June 2025. This is the first dividend payment since the pandemic, signaling the company’s financial stability and recovery.
Additionally, Rolls-Royce will initiate a £1 billion (€1.2bn) share buyback program, further boosting shareholder value and highlighting the company’s strong cash position.
Challenges and Supply Chain Issues
Despite the positive financial results, Rolls-Royce acknowledged the ongoing challenges posed by supply chain disruptions. The global aviation industry has struggled to meet post-pandemic demand, and Rolls-Royce estimates that these issues could cost the company between £150m and £200m (€181.7m to €242.3m) in 2025.
CEO Tufan Erginbilgic confirmed that the company is actively managing these supply chain issues and expects them to continue for another 12 to 18 months. However, Rolls-Royce remains optimistic about overcoming these obstacles and has set ambitious cost-saving goals for the coming year.
Mid-Term Financial Targets and Growth Plans
Looking ahead, Rolls-Royce set its sights on long-term growth with mid-term targets that include achieving an underlying profit between £3.6bn and £3.9bn (€4.4bn to €4.7bn) by 2028, alongside an operating margin target of 15% to 17%. The company is also targeting free cash flow of between £4.2bn and £4.5bn (€5.1bn to €5.4bn).
Erginbilgic emphasized that these targets are part of a broader growth strategy, with the company’s financial turnaround well underway. “We see strong growth prospects beyond the mid-term,” he said.
Cost-Cutting and Restructuring Efforts
Since taking over in 2023, CEO Tufan Erginbilgic has focused on improving Rolls-Royce’s efficiency and financial health. This includes restructuring efforts such as cutting 2,500 jobs and selling off underperforming assets. These measures have started to deliver positive results, with Rolls-Royce now on track to achieve more than £500m (€605.8m) in cost savings by 2025—two years ahead of schedule.
Positive Outlook and Investor Confidence
Investment analyst Russ Mould from AJ Bell commented on Rolls-Royce’s strong recovery: “The latest results and upgraded financial guidance show that Rolls-Royce is not just stabilizing but also making solid progress toward growth.”
The company’s performance and future outlook have instilled confidence in investors, driving Rolls-Royce’s share price to new heights.
Conclusion
Rolls-Royce’s impressive financial results, combined with the announcement of a share buyback and dividend payments, have sparked investor optimism. Despite ongoing supply chain challenges, the company’s solid performance, cost-saving measures, and ambitious growth targets position it well for long-term success in the competitive aviation industry.