Rolls-Royce Shares Surge After Raising FY Profit Guidance

Rolls-Royce (LON: RR.) shares soared more than 11% at the start of Thursday's session after the engineering giant announced a significant uplift in its full-year profit forecast.

The company has reported a strong first-half performance, driven by cost-cutting measures and improved commercial performance across its divisions.

Underlying operating profit for the first six months of the year reached £1.1 billion, representing a 74% increase on the previous year. Meanwhile, pre-tax profit came in at £1.035 billion, up from £524 million in H1 2023, and revenue was £8.18 billion, an increase from the £6.95 billion reported during the same period last year.

This robust performance has enabled Rolls-Royce to boost its 2024 full-year underlying operating profit expectation to between £2.1 billion and £2.3 billion from the previously guided range of £1.7 billion to £2.0 billion. Free cash flow guidance was also lifted to between £2.1 billion and £2.2 billion from £1.7 billion to £1.9 billion.

Furthermore, the company has revealed plans to reinstate shareholder distributions for the full year, starting with a 30% payout ratio.

This move signifies a significant step forward in the company's turnaround strategy, which has seen it reduce debt and improve cash flow.

CEO Tufan Erginbilgic expressed satisfaction with the company's progress, highlighting the successful execution of strategic initiatives and the resilience demonstrated in a challenging supply chain environment.

“Our transformation of Rolls-Royce into a high-performing, competitive, resilient, and growing business is proceeding with pace and intensity,” he stated. “We are expanding the earnings and cash potential of the business in a challenging supply chain environment, which we are proactively managing. We are on track to deliver our mid-term targets.”

Rolls-Royce shares soared at the open, climbing to a high of 502.2p. At the time of writing, the stock is up over 10% at 497.9p per share.