By Leeham News Team
February 27, 2025, © Leeham News: Underlying operating profit at Rolls-Royce surged to £2.5bn ($3.17bn) in 2024, up from £1.6bn the previous year – a 57% increase – according to the company’s full year 2024 results announced on Thursday.
Profits soared this year. Credit: Rolls Royce
Strong financial performance in the group’s civil aerospace, defense and power systems divisions all contributed to the result, which beat analysts expectations (aside from power systems, which came below expectations) and has been hailed as evidence of a turnaround for the once-struggling company under CEO Tufan Erginbilgic’s leadership. The former BP executive previously described Rolls Royce as a “burning platform.”
Rolls Royce’s operating margin grew by 8.7pts to 13.8% last year, while free cash flow leapt to £2.4bn from £1.9bn and revenue rose to £17.8bn from £15.4bn. The £2.5bn operating profit was ahead of a forecast for between £2.1bn and £2.3bn.
As a result of the financial progress, the UK-based company has reinstated its dividend for the first time since the pandemic, announcing a 6 pence per share payout.
Growth across the board
Although supply chain difficulties persist and are expected to continue in the short-to-medium term, amounting to a £150-200m cash impact last year and this year, all major business segments have shown significant improvement.
Civil Aerospace’s operating margin rose to 16.6% from 11.6% in 2023, driven by higher widebody aftermarket profit and stronger performance in business aviation.
In recent months Rolls Royce has tested its UltraFan demonstrator and is confident that its civil aero engine design work will position the company “strongly for a new generation of narrow and widebody aircraft”.
Having set a mid-term target to improve the time on wing of its modern engines by an average of 40%, Rolls Royce now expects to improve this by an average of more than 80%.
Contributing to this, flight testing of a new HPT blade for the Trent 1000 TEN engine was completed successfully in January 2025. This is expected to more than double the time on wing of the engine.
Imminent improvements to the Trent 1000 and Trent 7000 engines will also deliver an incremental 30% time on wing benefit by the end of 2025, with testing commencing in April.
Progress has also been made on the Trent XWB-84 and Trent XWB-97 to improve efficiency and durability.
Rolls Royce continues to gain market share of the widebody installed fleet, which has grown from 32% at the end of 2022 to 36% at the end of 2024, supported by a market share of more than 50% of new engine deliveries over the past two years.
Business and defense
Within the business aviation segment, operating profit has more than doubled in two years with Rolls Royce now accounting for 70% market share on large cabin jets. The newly certified and delivered Pearl 700 engines that will power the Gulfstream G700 and the forthcoming G800 helped here.
Increased defense spending amid ongoing geopolitical uncertainties has also contributed to the growth.
Rolls Royce won the Survivable Airborne Operations Center (SAOC) contract to deliver a replacement for the United States Air Force’s current fleet of E-4B “Nightwatch” aircraft, and the TACAMO contract for Northrop Grumman (alongside an eight year submarines contract worth around £9bn with the UK Ministry of Defence).
The Power Systems unit, which is working to deliver a next generation engine that will enter the market in 2028, delivered an operating margin of 13.1%, up from 10.4% in 2023.
However, over the last year Rolls Royce made the decision to close its advanced air mobility, electrolyser and fuel cells activities. Notably, in a November 2024 trading update, the company confirmed its exit from electric propulsion activities in the advanced air mobility (AAM) sector.
‘Significantly improved performance’
Commenting on the full-year results, CEO Tufan Erginbilgic said the results demonstrated Rolls Royce’s transformation into a “competitive, resilient” business.
“All core divisions delivered significantly improved performance, despite a supply chain environment that remains challenging,” he said. “Significantly improved performance and a stronger balance sheet gives us confidence to reinstate shareholder dividends and announce a £1bn share buyback in 2025.”
Erginbilgic’s “efficiency and simplification program” alone delivered over £350m of savings by the end of 2024, although the mantra remains that there is “still more to do”.
Looking ahead, Rolls-Royce has set ambitious targets, with a goal of increasing its underlying operating profit to £2.7bn-£2.9bn in 2025 and between £3.6 billion and £3.9 billion by 2028.
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