Rolls-Royce has seen its share price increase by over 17% after the engineering firm said it is set to reach its operating profit guidance two years earlier than forecast.

In its 2024 results, the FTSE 100 listed firm saw its operating profit reach £2.5bn, reflecting the impact of "strategic initiatives, commercial optimisation and cost efficiency benefits".

Rolls-Royce’s free cash flow also hit £2.4bn, which it said was “driven by strong operating profit and continued LTSA balance growth”.

Its revenue also increased by 13% to £17.5bn in the year to the end of 2024, while its earnings per share jumped by 47.5% to 20.3 pence.

Chief executive officer at Rolls Royce, Tufan Erginbilgic, said: "Strong 2024 results build on our progress last year, as we transform Rolls-Royce 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."

Along with this trading update, Rolls-Royce has announced a £1bn share buyback programme that will commence immediately, for completion through 2025.

The FTSE 100 listed has also updated its mid-term targets, with its underlying operating profit set to reach between £3.6bn and £3.9bn, a free cash flow of between £4.2bn and £4.5bn, and a 18% to 21% return on capital by 2028.

Equity analyst at Hargreaves Lansdown, Aarin Chiekrie, said: "Rolls-Royce continues to soar above expectations, after delivering another set of high-flying results.

"Revenues are being boosted by the upward trend in engine-flying hours, which are now cruising above pre-pandemic levels. But that’s just one part of the puzzle. Layoffs, contract renegotiations, process changes, and increased use of data to drive efficiencies have put Rolls on a much healthier platform. As a result, margins have moved much higher, helping to convert the increased flying hours and revenue into profits.

"Rolls-Royce also has exposure to the defence sector, with around 25% of revenue coming from this area. Earlier in the week, Keir Starmer stated that UK defence spending is set to rise from 2.3% to 2.5% of GDP by 2027. With positions in combat aircraft and nuclear submarines, Rolls-Royce looks well-paced to capture some of the increased defence spending."

---