Rolls-Royce shares soared to a record high as the British engineering champion pledged to hand £1.5billion to investors after hitting turnaround targets two years early.
In a sign the recovery under chief executive ‘Turbo’ Tufan Erginbilgic is gathering pace, the engine-maker announced a 6p a share dividend for 2024, worth £504million, alongside a £1billion stock buyback.
It was the first dividend for five years and first buyback for a decade as it cashed in on a rebound in air travel following the pandemic and increased defence spending.
Rolls-Royce said it was on course to hit its 2027 profit targets – set in 2023 – this year.
And Erginbilgic, pointing to submarine and fighter jet programmes it is working on, said scaling them up will ‘create more jobs in the UK without any doubt’.
Shares hit a record high of 760p in early trading before closing up 15.9 per cent, or 100.6p, at 731.6p.
Turnaround: Rolls Royce shares have soared nearly eightfold since boss ‘Turbo’ Tufan Erginbilgic took over at the start of 2023 when Erginbilgic took over
The stock has now risen nearly eightfold since the start of 2023 when Erginbilgic took over and branded the company a ‘burning platform’ before embarking on a campaign of cost-cutting and shock therapy.
The rise in the shares has increased the value of Rolls-Royce by £54.3billion – taking it from £7.9billion to £62.2billion. ‘We made great progress and we see a lot more potential,’ said Erginbilgic, who is nicknamed ‘Turbo’ for the speed at which he works.
JP Morgan analysts called the results ‘outstanding’ and said ‘the future looks very bright’ while Richard Hunter, at Interactive Investor, said the unexpected buyback was ‘lighting a fire under the shares’.
He added: ‘The burning platform has long been extinguished. Rolls is now firing on all cylinders.’
Reporting a near-80 per cent jump in annual profits to £2.3billion, Erginbilgic described his targets as ‘a milestone, not a destination’ and said he expected ‘strong growth prospects beyond the mid-term’ as he outlined ambitious new goals.
Rolls has also benefited from a rebound in air travel and increased defence spending following the 2022 invasion of Ukraine by Russia.
Erginbilgic praised Prime Minister Keir Starmer’s vow to pump more cash into defence, with military spending set to hit 2.5 per cent of GDP by 2027.
‘Developing sovereign capabilities for the UK will be even more important in this uncertain world,’ Erginbilgic said.
He noted that defence programmes contribute to economic growth and boosted the development of supply chains and labour skills.
But Rolls still faces challenges, and has been criticised over the performance of its Trent 1000 jet engines, which are used by passenger planes.
It has been struggling to keep pace with demand for repairs, admitting it had seen a ‘significant increase in Trent 1000 major refurbishments’.
That did not dampen investors’ moods, however.
AJ Bell investment director Russ Mould said: ‘Rolls is delivering every bit of good news imaginable, and it’s no wonder the share price has hit a new record high.’
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