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Rolls-Royce trips up due to virus travel bans

by LLB Editor
26th Jan 21 11:30 am

The latest restrictions on travel in various parts of the world have tripped up Rolls-Royce just as it was settling into its recovery plan.

The negative impact on cash flow is unwelcome, however no-one should have expected it to travel a smooth path in early 2021 given the ongoing uncertainty on when the aviation sector will return to better health.

Rolls-Royce is well advanced with its cost-cutting programme and liquidity is not currently a worry, which provides some comfort that it can weather the current storm.

“However, the market will be keeping a close eye on the state of the aviation industry and whether the second half of 2021 is realistic for a notable increase in the number of planes flying. That matters for Rolls-Royce as its real money is made from repair and maintenance work rather than the sale of engines, and that requires planes to be in the sky.

“The company is trying to raise £2 billion from disposals and has so far agreed to offload its nuclear instrumentation business for an undisclosed sum. Among the other assets up for sale are the TP Aero arm and its gas and diesel engines business, Bergen Engines.

“There will be increasing pressure on management to get deals struck, given the current backdrop may well be more fragile than the assumptions in last year’s restructuring plan,” according to AJ Bell.

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