Rolls-Royce has announced its financial results for the first half of 2024, showcasing significant progress in its transformation into a high-performing, competitive, and resilient business. The company reported an underlying operating profit of £1.1 billion, reflecting a 74% increase from the prior period, and an underlying margin of 14.0%. These results underscore the positive impact of strategic initiatives focused on commercial optimization and cost efficiencies across the Group.
Financial Highlights
- Underlying Operating Profit: Increased by £0.5 billion to £1.1 billion.
- Free Cash Flow: Achieved £1.2 billion, driven by higher operating profit and continued growth in Long Term Service Agreement (LTSA) balances.
- Return on Capital: Increased to 13.8%, indicating significant value creation.
- Net Debt: Reduced to £0.8 billion, driven by a statutory net cash flow from operating activities of £1.7 billion.
- Revenue: Increased to £8.2 billion, up from £6.95 billion in H1 2023.
- Operating Margin: Improved to 14.0%, up from 9.7% in H1 2023.
Strategic Progress
CEO Tufan Erginbilgic commented on the company’s transformation: “Our strong first half results reflect the continued delivery of our strategic initiatives and a relentless focus on commercial optimization and cost efficiencies across the Group. These results and our increased financial resilience give us the confidence to raise our 2024 guidance and reinstate shareholder distributions in respect of the full year 2024 results.”
Segment Performance
- Civil Aerospace: Delivered a 18.0% operating margin, up from 12.4% in H1 2023, driven by higher aftermarket profit from large engine LTSAs and strong business aviation performance.
- Defence: Achieved an operating margin of 15.5%, up from 13.6% in H1 2023, with growth in aftermarket profit and submarines.
- Power Systems: Reported a 10.3% operating margin, up from 7.0% in H1 2023, supported by pricing actions and increased demand for data center power solutions.
Cost Efficiency and Cash Flow
The company’s Efficiency & Simplification programme has delivered substantial savings, contributing to improved cash flow and reduced net debt. Free cash flow reached £1.2 billion, a significant increase from £0.4 billion in H1 2023. This improvement was driven by higher underlying operating profit and reduced working capital outflows.
Shareholder Distributions
In light of the strong financial performance and increased resilience, Rolls-Royce is reinstating shareholder distributions for the full year 2024, starting at a 30% pay-out ratio of underlying profit after tax. The company expects to maintain a 30-40% payout ratio in subsequent years, subject to final Board recommendation and shareholder approval at the 2025 Annual General Meeting.
Outlook and Guidance
Rolls-Royce has raised its full-year 2024 guidance, reflecting confidence in continued execution of strategic initiatives despite ongoing supply chain challenges. The updated guidance includes:
- Underlying Operating Profit: £2.1 billion to £2.3 billion, up from the previous range of £1.7 billion to £2.0 billion.
- Free Cash Flow: £2.1 billion to £2.2 billion, up from the previous range of £1.7 billion to £1.9 billion.
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