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Rolls-Royce chief amasses £22mn paper profit as shares jump

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The new chief executive of Rolls-Royce has made a paper profit of close to £22mn on his holdings in the British engineer following a powerful rally in its share price.

Tufan Erginbilgiç, who took the helm in January last year, received £7.5mn worth of shares in two tranches as a golden hello to compensate for lost earnings and bonuses from his previous employer private equity firm Global Infrastructure Partners.

Investors have bought into his restructuring, making Rolls-Royce’s stock the top performer in Europe’s Stoxx 600 index of largest listed companies. Shares in the company, which makes engines for large civil aircraft and nuclear propulsion systems for the Royal Navy’s submarine fleet, have jumped more than 250 per cent since he joined.

Erginbilgiç’s shares were granted in March 2023 at a price of 90.8p per share. They closed at 353p on Friday, giving him a paper gain of £21.6mn. Erginbilgiç cannot realise any potential gains until 2027 at the earliest; the two tranches vest in 2027 and 2028 and can be clawed back if needed.

The former oil executive said on Thursday that annual operating profits and margins had more than doubled and forecast further growth in 2024.

Erginbilgiç declined to comment on the rally in Rolls-Royce’s share price, telling the Financial Times on Thursday that he did not look at the share price every day, “it is not a good idea”.

There had been “no easy wins”, he said.

“As long as we do the right things and make progress on our agenda, the share price will go where it will go,” he added. “Our drive is to create value for all the stakeholders of Rolls-Royce.”

Rolls-Royce said “any shareholder who has held shares since March last year will have seen exactly the same percentage gain as a result of our transformation programme”.

Erginbilgiç is paid a base salary of £1.25mn at Rolls-Royce, 30 per cent of which is paid as shares deferred for two years. He could have earned more than £6.2mn in salary and shares in his first year at the helm if he met all his annual performance targets. 

While the actual targets for the incentive plan were not disclosed in last year’s annual report, they include metrics for free cash flow and operating profit. Under the terms, 40 per cent of shares awarded have to be held for three years and 60 per cent for four years.

Erginbilgiç, who came under fire for branding Rolls-Royce a “burning platform” shortly after joining, has insisted that the company’s strong financial performance is down primarily to his actions and not the recovery in international flying. The company makes most of its money from maintenance and service contracts when its engines are flying.

So-called engine flying hours recovered to 88 per cent of pre-coronavirus 2019 levels last year, up from 65 per cent in 2022, the company said on Thursday.

Rolls-Royce in November set midterm financial targets including operating profit of as much as £2.8bn and free cash flow of £3.1bn by 2027. 

Erginbilgiç said Rolls-Royce would be “over halfway” towards these midterm targets by the end of 2024, noting that “we are front-end loading the performance improvement delivery”. 

While 2027 was still the “most probable outcome” for Rolls-Royce to hit its targets, “if we can go faster, we will,” he told the Financial Times.

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