Jamie Spencer
Rolls-Royce Holdings Plc (RYCEF.PK, RR.L, RYCEY.PK) reported weaker-than-expected profit for fiscal 2024 on Thursday, despite an increase in revenues. The British aerospace and defense giant attributed its performance to a challenging supply chain environment, even as all core divisions showed improved results.
2024 Financial Results: Profit Down, Revenue Up
For fiscal 2024, Rolls-Royce’s profit before taxation declined to £2.23 billion from £2.43 billion in the previous year. However, basic earnings per share rose to 30.05 pence, up from 28.85 pence a year ago. Underlying profit before taxation increased to £2.29 billion, compared to £1.26 billion in the prior year.
Despite the drop in profit, Rolls-Royce reported revenue growth, with total revenue reaching £18.91 billion, up from £16.49 billion in 2023. Underlying revenue also increased to £17.85 billion from £15.41 billion the year before, reflecting strong demand across its core divisions.
2025 Guidance: Accelerated Targets and Strong Cash Flow
Looking ahead to fiscal 2025, Rolls-Royce projects underlying operating profit between £2.7 billion and £2.9 billion, along with free cash flow within the same range. The company expects to achieve its Capital Markets Day targets for 2027 two years earlier than planned.
CEO Tufan Erginbilgic stated, “All core divisions delivered significantly improved performance, despite a supply chain environment that remains challenging. Based on our 2025 guidance, we now expect to deliver underlying operating profit and free cash flow within the target ranges set at our Capital Markets Day, two years earlier than planned.”
The upgraded mid-term targets include underlying operating profit of £3.6 billion to £3.9 billion and an operating margin of 15% to 17%, based on a 2028 timeframe. Erginbilgic emphasized that these targets are “a milestone, not a destination,” highlighting strong growth prospects beyond the mid-term.
Dividend and Share Buyback Program
Rolls-Royce announced a dividend of 6.0 pence per share for the full year 2024, representing a 30% payout ratio of underlying profit after tax. The dividend is scheduled to be paid on June 16 to shareholders on the register as of April 22.
Additionally, the company unveiled a share buyback program to return up to £1 billion to shareholders. The buyback will be executed in tranches, starting immediately and expected to conclude no later than December 31, 2025.
Mid-Term Growth and Strategic Outlook
With its upgraded guidance and ambitious mid-term targets, Rolls-Royce is positioning itself for robust growth. The company aims to enhance profitability while maintaining strong free cash flow, supported by continued demand across its aerospace and defense divisions.
Erginbilgic highlighted the company’s strategic focus on operational efficiency and innovation, which are expected to drive sustainable growth. “These mid-term targets are a milestone, not a destination. We see strong growth prospects beyond the mid-term,” he noted.
Mixed Results but Optimistic Outlook
Rolls-Royce’s fiscal 2024 results reflect a mixed performance, with declining profit but rising revenue and improved earnings per share. Despite the challenging supply chain environment, the company delivered strong underlying results across its core divisions.
Looking forward, Rolls-Royce is optimistic about its growth trajectory, backed by accelerated targets, a robust dividend policy, and a strategic share buyback program. Investors will be watching closely as the company navigates market dynamics and continues its operational transformation under CEO Tufan Erginbilgic’s leadership.
