Rolls-Royce rewards employees with stock package after profit surge

After Rolls-Royce experienced a significant business upswing and resumed dividend payments for the first time in five years, the company is awarding shares worth more than £700 to each of its employees. Tufan Erginbilgiç, CEO of the FTSE 100-listed group, announced in an internal message on Thursday that 150 shares would be distributed to 'every colleague in every part of our organization' in September. Since Erginbilgiç took over as CEO in January 2023, Rolls-Royce's share price has more than quintupled, which is attributed to the revival of international travel and a restructuring plan he implemented. On Thursday, the shares were trading at 491 pence in London, valuing the stock allocation at approximately £730. In his message, partially reviewed by the Financial Times, Erginbilgiç described the resumption of dividend payments as an 'important moment' for shareholders and future investors of Rolls-Royce. He emphasized that many consider a dividend to be a prerequisite for investing in the company. Erginbilgiç highlighted that the results achieved were made possible by the company's employees and that it is therefore 'important that you share in our success.' 'We want to acknowledge your contribution to our future success and reward you for the role you will play in it,' he added. Known for its engines that power large passenger aircraft, the group suspended its dividend payout in 2020 — the first time since its privatization in 1987 — due to the severe impact of the Covid-19 pandemic. Rolls-Royce generates the majority of its revenue from the maintenance and servicing of its engines when they are in operation, which was hardly the case during the pandemic. Since becoming CEO, Erginbilgiç has swiftly implemented a comprehensive cost and turnaround program, including the centralization of key functions such as HR. He also focused on renegotiating loss-making engine contracts. On Thursday, the company reported £1.1 billion in operating profit for the first half of the year, an increase of 74 percent compared to the previous year. The forecast for this year's underlying operating profit was also raised to £2.1 to £2.3 billion. The goal is a free cash flow of £2.1 to £2.2 billion, higher than the previous guidance of £1.7 to £1.9 billion. Rolls-Royce already has an employee stock purchase program, but this is the first time shares are being given away directly. Employees will be required to hold the shares for a certain period, according to insiders, who confirmed that the CEO will not receive any shares. Rolls-Royce could issue new shares or use shares from its own stock, as the company, according to a shareholder resolution at the last AGM, has flexibility in its stock plan designs. Last year, the company employed over 40,000 people worldwide, so the stock allocations are estimated to cost around £30 million. Rolls-Royce stated, 'It is important that all our employees can share in our success, so we are giving them the opportunity to be part of the company by awarding 150 shares to each colleague.'