Rolls-Royce (LON) shares soared to a record high on Thursday after the company announced the reinstatement of its dividend and upgraded profit guidance for 2024.
Share Price Surge
As of 4:11 am (0811 GMT), Rolls-Royce shares were trading 9% higher at GBP 490.
Upgraded Financial Guidance
The company raised its full-year guidance, now anticipating underlying operating profit to be between £2.1 billion and £2.3 billion, and free cash flow to fall between £2.1 billion and £2.2 billion.
Dividend Reinstatement
Rolls-Royce revealed plans to reinstate shareholder distributions starting with a 30% pay-out ratio of underlying profit after tax, aiming for an ongoing pay-out ratio of 30-40% annually.
First Half 2024 Performance
For the first half of 2024, Rolls-Royce reported:
Underlying operating profit: £1.1 billion, a 74% increase from the previous period.
Underlying margin: 14%.
Free cash flow: £1.2 billion, up from £0.4 billion the previous year.
The company attributed these positive results to its focus on commercial optimization and cost efficiency.
Debt Reduction and Capital Return
Rolls-Royce significantly reduced its net debt to £0.8 billion, down from £2 billion at the end of 2023, and improved its return on capital to 13.8%.
CEO’s Statement
“We are expanding the earnings and cash potential of the business in a challenging supply chain environment, which we are proactively managing. We are on track to deliver our mid-term targets,” said Rolls-Royce CEO Tufan Erginbilgic.
Rolls-Royce’s strategic initiatives and financial discipline have driven substantial improvements in profitability and cash flow, resulting in strong market performance and enhanced shareholder returns.
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