Rolls-Royce announces first dividend since Covid-19 pandemic; Gatwick runway decision expected
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In another sign of confidence, Rolls-Royce has lifted its mid-term financial targets.
It tells shareholders:
Upgraded mid-term targets of £3.6bn-£3.9bn underlying operating profit, 15%-17% operating margin, £4.2bn-£4.5bn free cash flow, and 18%-21% return on capital based on a 2028 timeframe.
The company is also aiming for between £2.7bn and £2.9bn underlying operating profits this year, up from the £2.5bn in 2024.
This shows that CEO Erginbilgiç's turnaround plan – dubbed 'the most astonishing turnaround at a major FTSE 100 company in decades' by my colleague Nils Pratley – is continuing to pay off. Share
UK engineering firm Rolls-Royce is resuming payouts to shareholders for the first time since the Covid-19 pandemic hit its operations.
Following 'strong results' in 2024, Rolls-Royce has announced it will pay a dividend of 6.0p per share to investors. It also plans to spend £1bn on a share buyback scheme – another way of returning cash to shareholders.
The news comes as Rolls-Royce annouces that earnings rose by over 50% last year – with underlying operating profit up to £2.5bn, from £1.6bn in 2023.
Chief executive Tufan Erginbilgiç says Rolls-Royce is being transformed into a 'high-performing, competitive, resilient, and growing business'.
All core divisions delivered significantly improved performance, despite a supply chain environment that remains challenging.
We are moving with pace and intensity. Based on our 2025 guidance, we now expect to deliver underlying operating profit and free cash flow within the target ranges set at our Capital Markets Day, two years earlier than planned.
Significantly improved performance and a stronger balance sheet gives us confidence to reinstate shareholder dividends and announce a £1bn share buyback in 2025.
It's quite a turnaround since Covid-19 buffeted Rolls-Royce, which makes and services jet engines, runs a defence arm, and produces a range of power and propulsion products, including nuclear propulsion plants for the Royal Navy's nuclear submarines. It is also developing small modular nuclear reactors.
Back in October 2020 Rolls-Royce's share price fell below 40p as its airline customers kept flights grounded due to the pandemic. Last night they closed at 631p, near a record high.
The company has been cutting costs under Erginbilgiç, and also reported record-breaking orders amid mounting military tension around the world. Share
We're expecting to learn later today whether Gatwick airport will be allowed to open a second runway.
The Transport Secretary, Heidi Alexander, is due to announce today whether she has granted a development consent order which could allow more than 100,000 extra flights a year at the West Sussex airport.
Gatwick wants to modify an emergency runway and taxiway to allow it to be used alongside its existing main runway.
The BBC reports that on Tuesday Alexander told the annual dinner of trade body Airlines UK in London that she had 'no intention of clipping anyone's wings,' and said aviation was good for growth, adding:
'I am not some sort of flight-shaming eco warrior. I love flying – I always have.' Share
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The spectre of tariffs is stalking Europe today after Donald Trump announced last night he will soon hit goods made in the European Union with tariffs of 25%.
Trump told his first cabinet meeting, on Wednesday, that he will soon release details of the latest tariff threat, declaring:
'We have made a decision and we'll be announcing it very soon. It'll be 25%.'
Trump did not give further details but mentioned carmakers and said the levies would be applied 'generally', adding:
'And that'll be on cars and all other things.'
European stock markets are expected to open in the red, as investors anticipate a new front opening up in Trump's tradae wars.
Traders were already bracing for the looming March 4 deadline for US tariffs against Canada and Mexico, and for the steel and aluminum duties set to drop on March 12.
Each of these points could rattle markets, warns Stephen Innes, managing partner at SPI Asset Management, adding:
For now, markets are still fixated on tariff risk, not the impact. Absolute volatility begins when investors fully price these tariffs' inflationary and/or growth ripple effects. The dollar, bonds, and equities are about to enter the trade war vortex again, and positioning will be everything. The agenda 12.30pm ECB minutes from Jan meeting
1.30pm US GDP (1st revision) for Q4
1.30pm US initial jobless claims data Share
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