Rolls shares backfire as it scrambles to raise funds

SHARES in Rolls Royce tumbled by nearly 10pc yesterday as it emerged the company is looking for ways to bolster its battered finances.

The ailing British engineering group is considering a £1.5-2bn shares sale, as well as flogging assets such as Spanish subsidiary ITP Aero to raise cash, according to Bloomberg.

The coronavirus pandemic has devastated the aviation industry, grounding airline fleets and hammering demand for new aircraft – in turn affecting demand for the engines Rolls produces.

The Derby-based firm, whose share prices has more than halved from pre-crisis levels, has already announced it will slash 9,000 jobs globally because of the pandemic’s impact.

It responded to the claims in an afternoon statement, confirming it was ‘reviewing potential options to strengthen our balance sheet and position ourselves for the recovery following Covid-19’ but offered no further details.

After the announcement yesterday, Rolls shares fell 10pc or 29.3p to 263.2p.

The company insisted ‘no decisions have been made’, adding: ‘Our current financial position and liquidity remain strong.’

If Rolls presses ahead with raising cash by placing shares, it would be just the latest major firm to do so during the pandemic.

Housebuilder Taylor Wimpey (down 4.4pc, or 6.25p, to 137p) raised more than £525m in a placing last month, while gambling group William Hill (up 1.9pc, or 2.25p, to 118.35p) also raised £224m.

The slide in Rolls’ share price helped dragged the FTSE 100 into the red yesterday, marking a subdued end to the week for equities. The blue chip index dipped 1.3pc, or 83.06 points, to close at 6157.3, despite generally upbeat figures in a closely-watched survey showing that the UK private sector was poised for a recovery from the virus lockdown.

Similar surveys in China and the eurozone also showed that business activity was improving.

The final reading of June’s UK IHS Markit composite PMI (purchasing managers’ index) was 47.7, higher than an earlier reading of 47.6 and well above May’s 30. A reading of 50 or more indicates growth, with experts saying the data showed that the historic slump in activity caused by the pandemic had levelled off.

In particular, services rose from 29 in May to 47.1 in June.

Ulas Akincilar, head of trading at Infinox, said: ‘Few dared imagine it but on this evidence, the Great British bounce back is on.

‘This is gravity-defying stuff, and while not a total surprise it is a huge, caffeinated shot in the arm for UK market sentiment.’

Besides Rolls, the other top Footsie fallers included clothing retailer Next, which fell 4.6pc, or 232p, to 4798p and Lloyds Banking Group, which fell 2.6pc, or 0.01p, to 31.03p.

The picture was not much better on the FTSE 250 index of midsized companies, which ended the day down 0.4pc, or 65.83 points, at 17,302.03.

But it was not all doom and gloom yesterday.

Plastics maker Essentra was the index’s top riser, gaining 7.2pc, or 21.2p, to close at 314.2p, after publishing a trading update.

The firm revealed the impact of the virus crisis had been more severe on its second quarter but also offered investors a ray of light, saying that revenues had been improving month-by-month.

Essentra said like-for-like revenues were down by 17pc in April, 10pc in May and just 1pc in June.

Heath firms were also on the rise, with Puretech gaining 4.2p, or 11p, to close at 274p and

Oxford Biomedical gaining 2.9pc, or 21p, to finish the day at 757p.