Why Rolls-Royce?

Why invest in
Rolls-Royce?

We are a strong differentiated business looking to the future

“Our multi-year transformation programme has started well, with progress already evident in our strong initial results and full year guidance for 2023. There is much more to do to deliver better performance and to transform Rolls-Royce into a high-performing, competitive, resilient, and growing business.”

Tufan Erginbilgic
CEO

Highlights from our Capital Markets Day

Transforming our business for the future

As part of our journey to become more resilient and efficient, we will bring all our businesses together as one Rolls-Royce, aligning our ways of working to create a differentiated performance culture. Our renewed strategic clarity includes reorganising throughout the Group to maximise efficiency, synergies and capability building.

Our strategic framework

Capital allocation framework

We have three clear priorities when it comes to capital allocation:

A strong, resilient balance sheet

We’re positioning Rolls-Royce to better withstand volatility and external shocks, increasing our cash flow and improving our net debt to EBITDA ratio. These improvements will make our balance sheet much more resilient, with reduced gross debt and strong liquidity, leading to an investment grade profile in the near term.

Improving shareholder returns

When we are confident that the strength of our balance sheet is assured, we are committed to reinstating and growing shareholder distributions. Our current thinking is that our policy going forward will be based on an earnings payout ratio. This should result in growing shareholder distributions, consistent with our expectations of profit and cash performance.

A disciplined approach to investment

All our investment decisions are strategically aligned and are focused on driving greater value creation, prioritising the most profitable opportunities across the Group. We have strict financial criteria, with clear hurdle rates, in the mid to high teens for our three established divisions.

Long-term Growth Momentum

Our approach to portfolio choices and partnerships

We make decisions on where to invest and which businesses to leave, based on a razor-sharp focus on areas where we have an existing strategic advantage, due to strong market positioning and differentiated products and services. Our key focus areas will be submarines, defence aerospace, land defence, mobile power systems, business aviation and widebody aircraft.

We build strategic partnerships to help strengthen our position and support our investment in markets where we also have an advantage, including small modular nuclear reactors, narrowbody aircraft and battery energy storage systems.

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Embracing the energy transition

We’re embracing the energy transition for our customers and ourselves, focusing on growing markets where we have the capability to prosper. We’re already contributing to a low-carbon world, with products that include sustainable aviation fuel, battery energy storage, and civil nuclear technology.

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Opportunities for performance improvement

We have a strong portfolio of products and technologies in attractive markets. We see opportunities to improve performance across our core businesses and lift operating margins. For our Civil Aerospace business, we target a mid-term Operating Profit margin of 15-17% (2022: 2.5%). For Defence we target a mid-term operating margin of 14-16% (2022: 11.8%) and in Power Systems we target 12-14% in the mid-term (2022: 8.4%).

Extending time on wing

In Civil Aerospace, one of the strategic initiatives we have, which will improve both operating margin and cashflow, is keeping engines ‘on wing’ for longer.

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Debt investors

Our multi-year transformation is intended to ensure that we generate sustainable and growing operating profit and free cash flow, and drive higher return on invested capital. Our first priority is to strengthen the balance sheet and return to an investment grade profile in the near term.

Debt security information

Watch our Capital Markets Day

We unveiled our new strategic and financial priorities at our 2023 Capital Markets Day on 28 November 2023. Watch the live recording, browse our Virtual Exhibition, and download presentations from the day.

See it all

The Rolls-Royce 2023 Annual Report

Rolls-Royce Holdings plc

The Rolls-Royce 2022 Climate Review

Rolls-Royce Holdings plc

Our businesses

Download our fact sheets on our Group and individual business units. These contain key statistics and information about Rolls-Royce and the sectors in which we operate.

Contact our Investor Relations team

Talk directly to our Investor Relations team: [email protected]