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Rolls-Royce is to give more than £700 worth of shares to each of its employees after a bounceback in its business saw it raise profit guidance and resume dividend payments for the first time in five years.
Chief executive Tufan Erginbilgiç told employees in an internal message on Thursday that the FTSE 100 group would gift 150 shares to “every colleague, in every part of our organisation” in September.
Shares in Rolls-Royce have more than quintupled since Erginbilgic took the helm in January 2023, buoyed by a rebound in international travel and a restructuring plan implemented by the former oil industry executive. They closed at 491p in London on Thursday, valuing the share awards at about £730.
In his message, part of which has been seen by the Financial Times, Erginbilgic said the resumption of the dividend payout marked an “important moment” for Rolls-Royce shareholders and future investors. Many, he added, “view a dividend as a prerequisite to invest” in the company.
In his message, Erginbilgic said the results had been made possible by the company’s employees, adding that it was “important that you share in our success”. “We want to recognise your contribution to our future success and reward you for the role you will play in it,” he added.
The group, whose engines power large passenger aircraft, suspended its payout in 2020 — the first time it had done so since privatisation in 1987 — as it was reeling from the impact of the Covid-19 pandemic. Rolls-Royce makes most of its money from maintaining and servicing its engines when they are flying but Covid grounded most of the world’s large aircraft.
Since he became chief executive, Erginbilgic moved swiftly to instigate a sweeping cost efficiency and turnaround plan, including centralising core functions such as human resources. He has also focused on renegotiating lossmaking engine contracts.
The company on Thursday reported £1.1bn of operating profit in the first half of the year, up 74 per cent compared with last year. It also increased its forecast for underlying operating profit this year to between £2.1bn and £2.3bn. It is targeting free cash flow of between £2.1bn and £2.2bn, higher than its previous guidance of £1.7bn to £1.9bn.
Rolls-Royce already has a share-purchase scheme for employees but it is the first time it has gifted stock outright. Employees will have to hold on to the shares for a certain period of time, according to people familiar with the plans, who confirmed that the CEO would not receive any shares.
Rolls-Royce may issue new shares or use stock held in its own treasury as the company is understood to have flexibility in how it designs its share plans as granted by shareholders at its annual meeting. The company last year employed just over 40,000 people globally, according to its latest annual report so the share awards will cost the group an estimated £30mn.
Rolls-Royce said it is “important that all our people are able to share in our success, that is why we are giving them the opportunity to own part of Rolls-Royce by gifting 150 shares to every colleague”.
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