Historically Rolls-Royce has been shorthand for a smooth well-oiled machine – that association looks increasingly at odds with the current sputtering iteration of the group.
“Even before the pandemic CEO Warren East had been focusing his repair job, launched in the mid-2010s after a string of profit warnings, on addressing cash flow issues within the business,” says AJ Bell’s Russ Mould.
“Any progress has flown out of the window as its business making, fitting and servicing aircraft engines has all but disappeared overnight thanks to the impact on the aviation sector of Covid and its accompanying restrictions.
“Now cash is flowing out at an alarming rate with the second wave meaning the situation is markedly worse than it thought in August.
“The company is ahead of schedule with its restructuring efforts and is still flagging a return to positive cash flow in the second half of 2021, however there has to be a chance it will be forced to revisit this view too.
“The recovery of the travel industry from Covid is arguably more uncertain than other sectors. There could be considerable divergence in the roll-out of any vaccine and the ongoing handling of infections.
“This could mean travel limits are in place even after individual countries have largely reopened their economies.
“The market’s willingness to wait for an eventual recovery may be tested if it keeps moving further away, with the ultimate risk the company might need another fix for its balance sheet.”