August 7, 2022

Investors hope recent turbulence in air travel won’t hit Rolls-Royce

Investors crossing their fingers and hoping recent turbulence in air travel will not hit Rolls-Royce forecasts

Investors will be crossing their fingers next week and hoping the recent turbulence in air travel will not affect Rolls-Royce’s forecasts. 

Restrictions brought in by many countries to contain the Omicron variant have again hit long-haul flying. 

Rolls makes engines for large planes but earns money from maintaining them, and a large chunk of its revenue depends on how many hours they fly. 

The City will want an indication to the extent of the damage Omicron has wrought on Rolls’ recovery when it releases a trading update next Thursday. Shares have risen by almost 20 per cent since September. 

Half-year results released in August showed a surprise profit as it benefited from major cost-cutting that included slashing 9,000 of 52,000 jobs, raising £5billion and aiming to sell at least £2billion of businesses. But there is still much to do. 

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: ‘Producing and servicing [long-haul] aircraft engines has not been a nice business to be in over the last 18 months. To that end, we aren’t expecting a complete about-turn in fortunes.’ 

Analysts and shareholders are also monitoring any updates on its small modular reactor programme, which is aiming to build a fleet of mini nuclear power plants in the UK by the early 2030s. 

The company running the project, in which Rolls has an 80 per cent stake, recently secured £195m funding from private investors and £210m in Government grants. 

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