Rolls-Royce is set to announce a significant return to investors, with plans for a buyback valued at up to £1.5 billion. This announcement comes as the company prepares to release its annual results this week, reflecting a robust turnaround under the leadership of Tufan Erginbilgic, the former head of BP. The aerospace engineering firm aims to strengthen its cash flow, continuing its recovery trajectory.
The impending buyback follows a successful £1 billion program initiated last year, which marked the first share repurchase since 2014. This initiative was made possible after Rolls-Royce generated surplus funds from divesting its energy business. The previous buybacks were suspended in 2015 by former CEO Warren East due to concerns regarding the stability of the company’s balance sheet.
Erginbilgic’s leadership has led to a remarkable increase in the company’s market value, which has more than doubled to over £112 billion. This growth has been accompanied by a rise in the share price, which recently peaked at 1,346.50p, a jump of over 122 percent in the past year, largely driven by a rally in the defense sector.
Positive Outlook for Rolls-Royce
Analysts are anticipating a strong earnings report scheduled for October 5, 2023. Reports indicate that profits could reach between £3.1 billion and £3.2 billion, with some analysts suggesting that a history of exceeding expectations could lead to even better results. Aarin Chiekrie, an equity analyst at Hargreaves Lansdown, commented, “There’s been little sign of turbulence at Rolls-Royce of late, with strong demand in its Civil Aerospace business remaining a running theme.”
Chiekrie highlighted that large engine flying hours, which are critical for revenue generation in the Civil Aerospace division, have grown by 8 percent over the first ten months of the year, reaching 109 percent of pre-pandemic levels. The company’s engine orders pipeline remains robust, supporting a positive outlook for future growth.
As Rolls-Royce prepares to disclose its financial performance, all eyes will be on Erginbilgic, who is also expected to receive a multimillion-pound pay rise as the company revises its remuneration policy. This reflects the ongoing transformation and recovery that has characterized the company’s recent journey.
Investors and market analysts are keenly watching how the aerospace giant will leverage its strong cash flow to continue its upward trajectory, especially in light of recent successes and the overall health of the aviation market.
