Last week Rolls-Royce warned that its future “could be at risk” after it plunged to a record £5.4bn half-year loss, says Simon Foy in The Daily Telegraph. It says the collapse in air travel has crushed demand for its engines. So it has signalled its intention to raise £2bn from asset sales, including its ITP Aero division, which makes turbine blades for jet engines.
Meanwhile, the firm’s chief financial officer, Stephen Daintith, is leaving to join online grocer Ocado. Daintith’s move looks “rational” given the “ugly” short-term outlook, says Nils Pratley in The Guardian. What’s more, Rolls-Royce’s stock has fallen to a near-ten year low while its debt is “rated as junk”.
Still, it shouldn’t panic just yet. Not only can it sell assets, but it also “still has some room to borrow”. So while the firm’s share price remains“hostage to Covid-19 infections”, and shareholders may be forced to contribute in the form of a rights issue, the group is likely to “muddle through”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
An immediate rights issue might be a better option than selling off key assets, says Ed Cropley on Breakingviews. Asset sales may please creditors, but they will leave the company with a “permanent limp”. As far as ITP Aero is concerned, there is unlikely to be a “seller’s market” for an asset whose operating profit slid by more than two-thirds in the last six months. “And in terms of corporate synergies, losing a maker of jet-engine turbines inside a maker of jet engines sounds very unhelpful.” Selling the family silver “only works if you’ve got something else to eat of
-
House prices are falling in London but how does it compare to the rest of the UK?Advice The capital remains the most expensive part of the UK to buy a property, but it isn’t being as badly hit by the housing market slump. Where are London house prices heading?
-
Will a Santa Rally provide festive cheer for investors this year?
News Equities often get a seasonal boost during December - will there be a Santa Rally in 2023?
-
Crypto is “Monopoly money”
FTX won't be the last crypto scandal, because cryptocurrencies mirror the worst aspects of the finance industry.
-
OpenAI – corporate drama unleashed
OpenAI, the firm behind ChatGPT, was in uproar as its boss was booted out, briefly snapped up by Microsoft and then brought back again.
-
Can Lidiane Jones be Bumble's perfect match?
Dating app Bumble is taking on Lidiane Jones, a well-regarded leader in tech, as its new boss. Can she work her magic in a new arena?
-
Are corporate bonds a good bet?
Corporate bonds pay a slightly higher yield than governments, but spreads aren’t generous by past standards.
-
SoftBank’s shares slump on quarterly loss
Japanese investment group SoftBank’s technology funds have struggled, not least because of an investment in WeWork.
-
M&S shares shift from frumpy to fabulous as pre-tax profits are up by 56%
M&S is performing strongly and has announced it will pay a dividend for the first time since the pandemic.
-
The rise and fall of Sam Bankman-Fried – the “boy wonder of crypto”
Why the fate of Sam Bankman-Fried reminds us to be wary of digital tokens and unregulated financial intermediaries.
-
Three defence stocks set to flourish in an era of instability
A professional investor tells MoneyWeek where he’d put his money. Tom Bailey highlights three defence stocks that look promising.
