Rolls-Royce acts to appease investors with £1bn buyback

Aero-engine maker shelves acquisition plans in wake of shock profit warning

Rolls-Royce, the troubled aero-engine manufacturer, has moved to win back  the support of investors with a £1bn sweetener as it shelved plans for major acquisitions.

Rolls’ chief executive, John Rishton, has been under pressure since a shock warning in February that a decade of profit growth would come to a halt this year due to defence spending cuts. The announcement hit the share price.

At an investor strategy update, he launched a share buyback with the proceeds of the sale last month of Rolls’ gas turbines business to the German engineering giant Siemens, sending the shares up 8 per cent, to 1,092p. That still leaves them nearly 20 per cent lower than at the start of the year, but this is partly down to concerns surrounding a Serious Fraud Office investigation into the engine maker over corruption claims.

The buyback ends hopes that Rolls would make a large acquisition to rebalance the business and offset the impact of cuts at the Ministry of Defence and the Pentagon.

Earlier this year it emerged that Rolls had tried to snap up its Finnish rival Wartsila – a move that would have boosted its marine engineering work, such as designing ships. The deal would have been worth in the region of £8bn, and though the talks collapsed almost immediately, analysts had speculated that Rolls was on the acquisition trail.

Mr Rishton confirmed that “no material acquisitions are planned”.

He also confirmed financial guidance for 2014 and 2015, allaying fears of further downgrades after last week’s news that Dubai’s Emirates airline had cancelled an order for 70 A350 aircraft. The planes  would have been powered by Rolls engines and the order book was hit by £2.6bn.

At the event for investors, Mr Rishton also updated them over the way Rolls accounts for the sale of equipment and services in a division known as TotalCare. The accounting regulator demanded a reassessment of its 2013 figures, which saw nearly £40m wiped off last year’s profit.

Analysts were in agreement that the buyback was the best news in some time from Rolls. Espirito Santo said it showed management was “committing itself to very tight capital discipline”, while Ben Bourne at the broker Liberum  pointed out that there had  “been plenty of food for the bears recently” so the reiteration of guidance would be “well received”. He added: “No material acquisitions are planned, which is a relief as many investors were concerned they would make another play for Wartsila post July, requiring more equity.”

Sash Tusa, analyst at Edison Investment Research, said: “We are pleased that the company is responding to the market by returning circa £1bn to shareholders.”

Rolls powers over 30 types of aircraft and is the world’s second-biggest manufacturer of military aero-engines, and it is also developing its nuclear business. Earlier this week it signed a memorandum of understanding with CGN, a Chinese nuclear group, to provide engineering support.

News
A 1930 image of the Karl Albrecht Spiritousen and Lebensmittel shop, Essen. The shop was opened by Karl and Theo Albrecht’s mother; the brothers later founded Aldi
people
Arts and Entertainment
Standing the test of time: Michael J Fox and Christopher Lloyd in 'Back to the Future'
filmA cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Sport
Louis van Gaal watches over Nani
transfers
Arts and Entertainment
Flora Spencer-Longhurst as Lavinia, William Houston as Titus Andronicus and Dyfan Dwyfor as Lucius
theatreThe Shakespeare play that proved too much for more than 100 people
PROMOTED VIDEO
News
exclusivePunk icon Viv Albertine on Sid Vicious, complacent white men, and why free love led to rape
Sport
New Real Madrid signing James Rodríguez with club president Florentino Perez
transfersColombian World Cup star completes £63m move to Spain
Arts and Entertainment
Stir crazy: Noel Fielding in 'Luxury Comedy 2: Tales from Painted Hawaii'
comedyAs ‘Luxury Comedy’ returns, Noel Fielding on why mainstream success scares him and what the future holds for 'The Boosh'
Life and Style
Flow chart: Karl Landsteiner discovered blood types in 1900, yet scientists have still not come up with an explanation for their existence
lifeAll of us have one. Yet even now, it’s a matter of debate what they’re for
Arts and Entertainment
'Weird Al' Yankovic, or Alfred Matthew, at the 2014 Los Angeles Film Festival Screening of
musicHis latest video is an ode to good grammar. But what do our experts think he’s missed out?
Travel
Hotel Tour d’Auvergne in Paris launches pay-what-you-want
travelIt seems fraught with financial risk, but the policy has its benefits
Arts and Entertainment
booksThe best children's books for this summer
Life and Style
News to me: family events were recorded in the personal columns
techFamily events used to be marked in the personal columns. But now Facebook has usurped that
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst - Banking - Scotland - £380-£480

£380 - £480 per day: Orgtel: Business Analyst - Banking - Edinburgh - £380 - ...

Programme Director - Conduct Risk - London

£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Day In a Page

Noel Fielding's 'Luxury Comedy': A land of the outright bizarre

Noel Fielding's 'Luxury Comedy'

A land of the outright bizarre
What are the worst 'Word Crimes'?

What are the worst 'Word Crimes'?

‘Weird Al’ Yankovic's latest video is an ode to good grammar. But what do The Independent’s experts think he’s missed out?
Can Secret Cinema sell 80,000 'Back to the Future' tickets?

The worst kept secret in cinema

A cult movie event aims to immerse audiences of 80,000 in ‘Back to the Future’. But has it lost its magic?
Facebook: The new hatched, matched and dispatched

The new hatched, matched and dispatched

Family events used to be marked in the personal columns. But now Facebook has usurped the ‘Births, Deaths and Marriages’ announcements
Why do we have blood types?

Are you my type?

All of us have one but probably never wondered why. Yet even now, a century after blood types were discovered, it’s a matter of debate what they’re for
Honesty box hotels: You decide how much you pay

Honesty box hotels

Five hotels in Paris now allow guests to pay only what they think their stay was worth. It seems fraught with financial risk, but the honesty policy has its benefit
Commonwealth Games 2014: Why weight of pressure rests easy on Michael Jamieson’s shoulders

Michael Jamieson: Why weight of pressure rests easy on his shoulders

The Scottish swimmer is ready for ‘the biggest race of my life’ at the Commonwealth Games
Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn