Rolls-Royce Shareholders Set to Vote on £7-9bn Buyback as Geopolitical Storm Clouds Gather

Rolls-Royce heads into its AGM with a proposed dividend and buyback, but Middle East turmoil and surging fuel costs pressure its engine-hours revenue model and stock price.

Rolls-Royce finds itself caught in a tug-of-war between its strongest operational performance in years and the harsh realities of geopolitical turmoil in the Middle East. The Derby-based engine maker heads into its annual general meeting on Thursday, April 30, with investors set to vote on a proposed dividend of 9.5 pence per share for fiscal 2025 — the first payout in years — alongside a multi-billion-pound share buyback programme that could run through to 2028.

The stock, however, has been feeling the heat. Trading at around €13.02, it sits roughly 18 percent below its 52-week high and has slipped about 5.7 percent since the start of the year. It now trades well under its 50-day moving average, a technical signal that has caught the attention of market watchers.

The Engine Hours Model Under Pressure

What makes Rolls-Royce uniquely vulnerable to the current crisis is its revenue model. Civil Aerospace doesn't sell engines outright; it charges customers by the hour through long-term service contracts. Every flight hour a Trent engine logs generates revenue — and every cancelled flight subtracts it directly, with no offset.

That vulnerability is now being tested. Lufthansa has scrapped 20,000 flights after Brent crude surged past $105 a barrel. KLM, SAS and other carriers have followed suit with capacity cuts of their own. US jet fuel prices have nearly doubled since late February to roughly $4.88 a gallon, driven by the effective closure of the Strait of Hormuz, which has choked off crude and kerosene supplies.

The disruption goes beyond fuel costs. Major air corridors linking Africa, Asia and Europe are closed, forcing airlines onto longer routes that bypass the Middle East. Several large airports in the region — which together handle around 15 percent of global air traffic — remain shut. With Civil Aerospace accounting for 51 percent of Rolls-Royce's revenue, the risk is structural, not marginal.

An additional headwind came from US rival GE Aerospace, which recently downgraded its global flight forecast for 2026, predicting double-digit declines in the Middle East. That weighed on Rolls-Royce shares, though the British company's service contracts include guaranteed minimum offtake clauses that provide some buffer against outright revenue loss.

Analysts Hold Their Ground

Despite the turbulence, Wall Street remains broadly constructive. Wells Fargo initiated coverage with an "Overweight" rating and a price target of 1,350 pence, arguing the company still has room to beat its medium-term targets. The consensus among eleven Wall Street analysts stands at "Moderate Buy" — eight buys, three holds, no sells. The average price target sits at 1,430 pence, with the most bullish call at 1,600 pence.

That confidence rests on solid foundations. Rolls-Royce posted a 40 percent jump in adjusted profit for fiscal 2025. For the current year, management is targeting an adjusted operating profit between £4.0 billion and £4.2 billion — well above the consensus estimate of £3.65 billion. The company is also on track to hit its medium-term return targets roughly two years ahead of schedule.

Nuclear Ambitions Take Shape

Away from aviation, Rolls-Royce is quietly building a second growth engine. Its nuclear division signed a preliminary agreement with Czech utility CEZ Group in late April to build small modular reactors (SMRs). That makes Rolls-Royce the only company with multiple SMR contracts in Europe. The UK government is actively backing the expansion, and advanced talks are underway for further deals in Sweden. Rolls-Royce estimates it holds an 18-month lead over competitors in the European licensing process.

The Key Date: July 30

After Thursday's AGM, the next major milestone comes on July 30, when Rolls-Royce releases its quarterly results. The focus will be on engine flight hours — specifically whether they hit the targeted 115 to 120 percent of 2019 levels. If the capacity cuts from airlines have bitten deeper than the company's guidance currently assumes, management may be forced to revise its forecast lower. That would likely keep the stock's distance from its 52-week high intact for a while longer.