FTSE 100 shares round-up: Rolls-Royce and 3i chased higher

Confidence-boosting moves by Rolls-Royce Holdings (LSE:RR.) and 3i Group Ord (LSE:III) today fired up the engine giant's shares and helped the private equity firm narrow its valuation gap to below 20%.

• Our Services: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

Rolls has now risen by 18% since 23 October, including this morning's advance of 35.4p to 1,378p after it said it would buy back another £1.5 billion of its shares by February.

It added that operational, strategic and financial progress had given it “further confidence” in the delivery of recently improved targets for full-year operating profit and free cash flow.

Morgan Stanley, which has a price estimate of 2,000p on Rolls shares, said the buyback was a positive sign in relation to medium-term cash generation and continued investment.

It will take the running total to £4 billion, even though the company's £7-9 billion programme of shareholder returns is scheduled to run between 2026 and 2028.

The next major catalyst for Rolls is likely to be annual results in February, when chief executive Tufan Erginbilgic intends to revisit the company's medium-term targets.

These were upgraded after the 2025 results, with Rolls aiming for £4.9-5.2 billion of underlying operating profit and £5-5.3 billion of free cash flow.

Today's unchanged guidance in relation to annual results on 25 February point to £4.7-4.9 billion of underlying operating profit and £3.8-4 billion of free cash flow.

• Why this investing strategy thrives in winter
• eyeQ: FTSE 100 vs FTSE 250 – which one just triggered a buy signal?

The shares were at a record 1,586p a few days after July's results showed that all three divisions performed ahead of expectations, leading to upgraded guidance for this year.

However, they reversed 15% in October after the ongoing Middle East conflict dented the outlook for engine flying hours and widebody peer Safran posted a disappointing update.

A potential slowdown in the AI build-out also dented sentiment towards Rolls's Power Systems division, having been a major beneficiary of strong data centre demand.

However, the company said today that power generation orders for gas engines had almost tripled year-on-year, driven by prime power demand from data centres. It is also in the process of finalising a significant multi-year contract to supply backup engines to a hyperscaler.

Across the Power Systems division, around 40% of operating profit is from services where Rolls expects double-digit revenue growth and improving margins.

In Civil Aerospace, engine flying hours rose 4% year-on-year in the first ten months of the year to stand at 114% of 2019 levels.

Continued growth through the second half of the year supports expectations that the full-year figure will be within the company's guidance range of 115-120%.

Rolls pointed out that Middle Eastern airline flying hours in its fleet are above pre-conflict levels, while it expects fuel-related capacity reductions elsewhere to reverse as fuel prices fall.

Demand remains strong across both widebody and business aviation, resulting in a large engine order backlog of 2,500 engines. The increase from 2,266 seen at the end of June follows orders for 70 Trent 7000 engines from Avolon and 22 Trent 7000 engines from the Cathay Group.

Rolls added that demand is also strong across both mature and new defence programmes, alongside further progress for its Small Modular Reactor business in the UK and Europe.

Morgan Stanley said: “Overall, the strength of this update across both demand and execution, combined with accelerating shareholder returns, reinforces our confidence in the outlook for earnings and cash growth, and should help dispel lingering investor concerns. We remain bullish.”

• New target for Rolls-Royce and dividend surprise from M&S
• Another profit beat keeps Burberry turnaround on track

Alongside Rolls at the top of the FTSE 100 risers board, 3i Group surged by 139p to 2,704p after management signalled their confidence with a new £750 million buyback plan and by taking an increased stake in top-performing investment Action.

The European discount chain accounts for 80% of 3i's private equity portfolio, having driven total shareholder returns of approximately 2,132% between May 2012 and March 2026.

The recent acquisition of a further 2.1% stake took its ownership of the business to 67.5%. It said: “We retain very high conviction on our investment in Action, with the business continuing to compound growth and deliver very strong cash generation.”

Action, which trades from 3,500 sites, remains on track to open at least 400 stores in 2026 and is also making good progress towards entry into the United States in 2027.

Like-for-like sales are running 3.7% higher in the year to date, which implies an improvement during October despite the recent unrest across France and Germany.

The retailer ended September with a cash pile of over one billion euros, having already returned 450 million euros of dividends to shareholders including 3i.

• Nick Train: Diageo’s prospects and the firm I hope will quintuple in value
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

Today's interim results by 3i showed a total return of £1.6 billion or 5% on opening shareholders' funds, including a foreign exchange translation loss of £474 million.

Net asset value per share increased from 3,030p in March to 3,154p at the end of September, representing a narrower discount of 14% compared with 20% before today's share price rise.

The shares slumped to a three-year low near 2,000p after May’s annual results, when 3i highlighted consumer caution in France and Germany and underperformance of seasonal categories at the Action business.

The group, whose other private equity investments include Royal Sanders and Audley Travel, intends to pay an interim dividend of 42.25p on 8 January. This is set at 50% of 2026's total.