Rolls-Royce 'reviewing options' to strengthen balance sheet, shares tank

(Sharecast News) - Rolls-Royce confirmed on Friday that it is in the early stages of reviewing options to strengthen its balance sheet and position itself for recovery after the Covid-19 crisis.
However, the engine maker said no decisions have been made and insisted that its current financial position and liquidity remain strong.

"A further announcement will be made if and when appropriate," it said.

The very brief statement came after Bloomberg reported that Rolls-Royce was examining possibilities including selling shares and divesting assets. It was understood that the company's ITP Aero unit is one potential disposal being studied.

Sources cited by Bloomberg said Rolls-Royce could seek about £1.5bn to £2bn if it decides to proceed with an equity offering.

Precise figures have not been discussed and details could change, the sources said.

At 1540 BST, the shares were down 7.8% at 269.69p.

IG analyst Chris Beauchamp said: "While airlines can trumpet an increase in flight activity, they are not likely to go shopping for new planes, putting pressure on the aerospace sector, which helps to explain why Rolls-Royce shares have underperformed even the lacklustre FTSE 100 of late.

"A cash call is a sensible move, but it does not help to boost the attractiveness of the shares, which will likely continue to fall until some good news on orders is received."

Rolls-Royce announced in May that it was planning to cut at least 9,000 jobs as part of a plan to save more than £1.3bn a year in response to the "unprecedented" impact of the pandemic on the aviation industry.