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.

Life and Style
The Google Doodle celebrating the start of the first day of autumn, 2014.
tech
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
Sport
David Moyes and Louis van Gaal
football
News
Former Governor of Alaska Sarah Palin, left, with her daughter, Bristol
newsShe's 'proud' of eldest daughter, who 'punched host in the face'
PROMOTED VIDEO
Sport
New Zealand fly-half Aaron Cruden pictured in The Zookeeper's Son on a late-night drinking session
rugby
News
A cabin crew member photographed the devastation after one flight
news
Life and Style
Carol O'Brien, whose son Rob suffered many years of depression
healthOne mother's story of how London charity Maytree helped her son with his depression
Life and Style
food + drink
Arts and Entertainment
The cover of Dark Side of the Moon
musicCan 'The Endless River' carry on the tradition? See for yourself
News
Rob Merrick's Lobby Journalists were playing Ed Balls' Labour Party MPs. The match is an annual event which takes place ahead of the opening of the party conference
newsRob Merrick insistes 'Ed will be hurting much more than me'
Voices
A new app has been launched that enables people to have a cuddle from a stranger
voicesMaybe the new app will make it more normal to reach out to strangers
News
Liam Payne has attacked the media for reporting his tweet of support to Willie Robertson and the subsequent backlash from fans
peopleBut One Direction star insists he is not homophobic
Life and Style
healthFor Pure-O OCD sufferers this is a reality they live in
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
Sexual health charities have campaigned for the kits to be regulated
healthAmerican woman who did tells parents there is 'nothing to be afraid of'
Life and Style
fashion
Arts and Entertainment
The John Peel Lecture has previously been given by Pete Townshend of The Who, Billy Bragg and Charlotte Church
musicGodfather of punk will speak on 'free music in a capitalist society'
News
peopleAt least it's for a worthwhile cause
News
Shoppers in Covent Garden, London, celebrate after they were the first to buy the iPhone 6, released yesterday
tech
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

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Quantitative Risk Manager

Up to £80000: Saxton Leigh: My client, a large commodities broker, is looking ...

Day In a Page

A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world
Apple still coolest brand – despite U2 PR disaster

Apple still the coolest brand

Despite PR disaster of free U2 album
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments