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Rolls-Royce is to hand £1.2bn to shareholders after the engineering giant’s chief executive smashed his profit targets two years early.
Tufan Erginbilgic on Thursday said the business was moving “with pace and intensity” as he stormed past a milestone previously pegged for 2027.
The British company, which makes engines for some of the world’s biggest passenger planes, is benefitting from the post-Covid recovery in flying as airlines scramble to purchase more jets.
But under Mr Erginbilgic – dubbed “Turbo” in City circles – it is also becoming leaner and more profitable as he takes a red pen to spending with “zero budgeting” techniques.
On Thursday, Rolls reported underlying profits of £2.5bn for 2024, up from £1.8bn a year earlier, as well as an increase in margins from 5.1pc to 13.8pc. Both achievements were originally set out as “mid-term” targets meant to be achieved in two years’ time.
As a result, Mr Erginbilgic said he now had confidence to dish out a £250m dividend to investors as well as a £1bn share buyback scheme.
It is the latest sign of a remarkable turnaround under way at Rolls-Royce, which came close to collapse during the pandemic and had to raise billions of pounds in emergency funding.
The company’s shares rocketed 17pc higher on Thursday morning, to an all-time high of 742p. They are up 106pc on a year ago.
Mr Erginbilgic said: “Strong 2024 results build on our progress last year, as we transform Rolls-Royce into a high-performing, competitive, resilient and growing business.
“We are moving with pace and intensity.
“Significantly improved performance and a stronger balance sheet gives us confidence to reinstate shareholder dividends and announce a £1bn share buyback in 2025.”
The chief executive immediately upgraded the company’s mid-term targets to between £3.6bn and £3.9bn of underlying profits and even higher margins.
But he added: “These targets are a milestone, not a destination, and we see strong growth prospects beyond the mid-term.”
The big improvement was driven by Rolls’s civil aerospace business, which saw profits leap 80pc higher to £1.5bn.
Flying hours – a vital measure since Rolls only makes money when its engines are being used – rose 14pc to 18.8m hours.
Some 529 engines were delivered to customers, up 16pc, while maintenance and repair visits rose 7pc to 1,313.
Rolls also reaped fatter profit margins as the company continued to renegotiate contract terms with airline customers.
In defence, the engineering giant is benefitting from Western rearmament with major contracts including a £9bn submarines deal with the UK Ministry of Defence and deals in the US to provide engines for “doomsday planes” that form part of the American nuclear deterrent.