Rolls-Royce Shares Soar To a Record High as Company Reinstates Dividend and Raises Profit Forecast

Rolls-Royce shares surged over 11% to a record high on Thursday after the company announced the reinstatement of its dividend and upgraded its profit forecast following robust first-half results. By 9:20 am London time, shares were trading 9.4% higher.

The British aerospace and defense giant reported an underlying profit of $1.4 billion for the first half of the year and projected this figure to increase to between $2.7 billion and $2.9 billion in 2024. This forecast surpasses the previous 2023 full-year estimate of around $2.16 billion to $2.55 billion and exceeds market expectations. Additionally, full-year free cash flow is now expected to rise to between $2.7 billion and $2.8 billion, up from the earlier forecast of approximately $2.16 billion to 2.42 billion.

Rolls-Royce, a key supplier to aviation industry leaders Boeing and Airbus, also announced the resumption of dividends for the full year 2024, starting with a 30% payout ratio of underlying profit after tax. Dividend payouts were suspended in 2020 due to the pandemic-induced halt in air travel.

CEO Tufan Erginbilgic, who assumed leadership in 2023 with a mandate to revitalize the company, attributed the strong performance to the effective implementation of the company’s strategic plans and cost-efficiency programs. He stated, “Our transformation of Rolls-Royce into a high-performing, competitive, resilient, and growing business is proceeding with pace and intensity. We are expanding the earnings and cash potential of the business in a challenging supply chain environment, which we are proactively managing.”

Erginbilgic added, “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.”

In the first half of the year, group revenues rose to $10.4 billion, up from $8.9 billion in the same period last year, while underlying operating profit increased to around $1.5 billion from almost $857 million the previous year.

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