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Rolls-Royce roars back to life after pandemic crisis
Rolls-Royce roars back to life after pandemic crisis
Rolls-Royce has restored its dividend as the engineering giant recovers from the pandemic-era slump.
Tufan Erginbilgic, who took the helm in January last year, said shareholders would receive a payout for the current financial year equivalent to 30-40% of the FTSE 100 company’s underlying profits.
That’s expected to come to about 5-5.5 cents per share, based on the latest forecast, which was updated on Thursday.
Rolls, which makes engines for commercial aircraft, naval vessels and military jets, has not paid a dividend for five years.
The company, under former boss Warren East, had a planned payout for 2020 but canceled it after the coronavirus pandemic halted international air travel and decimated its finances overnight.
Mr. Erginbilgic’s decision to restore the dividend marks another symbolic moment in the the company’s path back to successafter the chief executive – known as “Turbo” by City analysts – launched a complete overhaul of the business.
The news sent Rolls shares soaring 11% in morning trading to a record high.
On Thursday, Mr Erginbilgic said: “Our transformation of Rolls-Royce into a high-performing, competitive, resilient and growing business is proceeding with pace and intensity.
“These results and our increased financial resilience give us the confidence to raise our 2024 guidance and reinstate distributions to shareholders.”
Tufan Erginbilgic, left, with Sir Keir Starmer and Airbus boss Guillaume Faury at this month’s Farnborough International Airshow – HOLLIE ADAMS/Shutterstock
This came as Rolls also upgraded its 2024 profit forecast. In its half-year results, the company forecast a full-year underlying operating profit of £2.1bn to £2.3bn, compared with analysts’ expectations of around £2bn. This is the figure on which the dividend will be based after tax and any other payments are deducted.
The new free cash flow target of £2.1-2.2bn is also higher than the previous forecast of £1.7-1.9bn.
In the first half of 2024, Rolls reported sales of £8.1 billion, up from £6.9 billion a year earlier. Underlying operating profits, meanwhile, jumped from £673 million to £1.2 billion.
The company previously reported blockbuster annual results in February, in which profit margins doubled and it posted record free cash flows.
Under Mr Erginbilgic’s leadership, Rolls’ share price has risen by more than 400% and the company’s coveted “investment grade” status has been restored by credit rating agencies.