Britain’s Rolls-Royce plans to launch a £1 billion share buyback, saying that with no major acquisitions on the horizon, it would return to investors the proceeds from a recent disposal.

The company, which said yesterday it was on track to meet guidance for this year and next, also said it would reduce group capital expend-iture to 4 per cent of underlying revenue over the next three to five years from the 4.9 per cent level at the end of 2013.

The update should reassure investors after a shock warning in February when it said that US and European spending cuts would halt profit growth this year. Since then it has also suffered a cancellation of an engine order which hurt its shares.

“As no material acquisitions are planned, and reflecting the strength of our balance sheet, we will return the proceeds of the Energy sale to our shareholders,” Chief Executive John Rishton said in a statement yesterday.

Rolls-Royce last year considered a bid for Finnish ship and power- plant engine maker Wartsila and analysts had asked whether such a deal could re-emerge.

A £1 billion share buyback is equivalent to about 5 per cent of Rolls-Royce’s current £19 billion market capitalisation.

Rolls-Royce, whose primary business is making engines for aircraft, in May agreed to sell its gas turbine unit to German conglomerate Siemens AG for £785 million. The deal is expected to be completed by the end of 2014.

Analysts expect Rolls-Royce to post flat pre-tax profit of £1.7 billion for 2014. Before February’s warning, they had expected pre-tax profits to grow 8 per cent this year.

Over the previous 11 years, the company enjoyed strong profits and revenue growth thanks to its civil aerospace unit, which generates about half of its sales, as demand for more fuel-efficient engines for planes made by Europe’s Airbus and US Boeing has soared.

Shares in Rolls-Royce have fallen 17 per cent over the last six months.