Shares in aero engine-maker Rolls-Royce (RR.) bolted 11% to 500p on 1 August, the first time in their history they have touched that milestone, after the firm posted forecast-beating first-half results and raised its full-year outlook.

A 14% operating margin and 13.8% return on capital employed are testament to chief executive Tufan Erginbilgic’s ‘tough love’ approach to optimising the firm’s commercial operations and grinding out cost efficiencies.

From £1.1 billion in the first half, an increase of 74% on the first half of 2023, full-year underlying operating profit is now seen between £2.1 billion and £2.3 billion against a previous forecast of £2 billion.

The firm is also reinstating dividend payments, with a 30% payout ratio this year rising to 40% over time.

Erginbilgic said the company was ‘expanding the earnings and cash potential of the business in a challenging supply chain environment, which we are proactively managing’.

Free cash-flow guidance for the year of up to £2 billion includes a £200 million ‘hit’ from supply-chain issues which the chief executive suggested could last until 2026.

Having trebled last year, Rolls-Royce shares are up more than two thirds this year making them the second-best FTSE 100 performer after cyber-security takeover target Darktrace (DARK).

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