19th Jun 2014 06:48
LONDON (Alliance News) - Rolls-Royce Holdings PLC Thursday moved to appease investors unhappy with the company's recent outlook downgrade, saying it will return cash to shareholders through a GBP1 billion share buyback once the planned sale of its energy gas turbine and compressor business to Siemens AG goes through.
It said the cash return reflects its strong balance sheet and because it isn't planning any material acquisitions.
The maker of aircraft and marine engines has had a tough few months. In February, its shares fell sharply after it surprised markets by warning that it expected a pause in overall profit and revenue growth in 2014 due to falling revenue in its defence businesses and lower marine unit revenue. It said it was confident growth will return in 2015. In May, it then cut the guidance for its marine unit, although kept its overall guidance for flat revenue and profit in 2014 and a return to growth in 2015. And earlier this month, it said about GBP2.6 billion, or about 3.5%, of its order book had been wiped out after airline Emirates cancelled an order for 70 airbus A350 planes that had been due to be equipped with Rolls-Royce engines.
In its statement Thursday, the company said it is still retaining its guidance for 2014 and 2015.
Rolls-Royce said May 7 that it had signed an agreement to sell its energy gas turbine and compressor business to German engineering firm Siemens in a deal worth GBP785 million in cash. It will also get a further GBP200 million for a 25-year licensing agreement, granting Siemens access to relevant Rolls-Royce aero-derivative technology for use in the 4 to 85 megawatt power output gas turbine range.
"As no material acquisitions are planned, and reflecting the strength of our balance sheet, we will return the proceeds of the Energy sale to our shareholders," Rolls-Royce Chief Executive John Rishton said in the company's statement Thursday.
The company said it is also giving an investor presentation Thursday, and will confirm its guidance for this year and next. It will also say it intends to drive capital expenditure towards 4% of underlying revenue over three to five years from the 2013 figure of 4.9%.
It will also say that its current expectations for deliveries of its Trent commercial aircraft engines are for more than 4,000 engines by 2023, and it is continuing to target a credit rating of between A- and A+.
By Steve McGrath; [email protected]; @SteveMcGrath1
Copyright 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Rolls-Royce