Rolls-Royce deals fire up hopes of recovery
THE City yesterday welcomed news that Rolls-Royce has made a breakthrough with ambitious plans to bounce back from the pandemic.
The FTSE 100 group, long the most prestigious name in British engineering, has sold its Bergen Engines business to Nottinghamshire industrials group Langley.
And, after the market closed, Rolls announced it is in exclusive talks, led by private equity group Bain Capital, to sell Spanish division ITP Aero, which makes parts for Eurofighter Typhoon jets.
Rolls is aiming to sell businesses worth £2bn to bolster its books after the pandemic virtually wiped out its major source of income for more than a year. It makes a large chunk of its money from servicing engines on long-haul planes.
Bergen and ITP Aero have been earmarked for sale for many months now. The numbers in the Bergen transaction are small compared with the overall goal, with Rolls set to make around £60m from the sale and keep another £34m of cash sat in the division.
But it is a relief for investors after a setback in March when Norway dramatically vetoed a £131m deal Rolls agreed with Russian train maker Transmashholding (TMH) because of links between TMH’s bosses and Vladimir Putin.
Bergen makes engines and technology for boats, including Norway’s navy.
It is unclear at this stage how much Rolls could recover from the sale of ITP Aero. However, it has been widely reported ITP Aero could be worth £1bn, potentially bringing Rolls halfway towards its goal in one fell swoop.
Rolls releases its half-year results today. Shares rose 1.4pc, or 1.4p, to 104.54p.
The FTSE 100 finished 0.3pc higher, up 18.14 points, to 7123.86, while the FTSE 250 climbed 0.3pc, or 58.08 points, to 23347.73.
The mid-cap index’s rise came despite bruising sell-offs for Ferrexpo and Morgan Sindall.
Investors in Ukrainian iron ore miner Ferrexpo had a lot to celebrate after sky-high metals prices sent its profits surging in the first six months of 2021.
Its backers will get a half-year payout triple what they received for the same period last year. Prices of iron ore, a key ingredient in steel making, have ballooned as the global economy has started to rebound from the Covid crisis.
But Ferrexpo fell 9.3pc, or 46.2p, to 449p after it said it expects to see demand for iron ore decline.
Construction and infrastructure group Morgan Sindall was the second-biggest mid-cap faller despite stonking results, which included first-half profits tripling to £54m on record revenue of £1.56bn. It fell 6.6pc, or 160p, to 2280p. Brick maker Ibstock made gains – finishing 1pc higher, up 2.2p, to 223.2p – after it said it had benefited from the DIY boom, with homeowners continuing to splash out on renovations.
AIM-listed drug developer Avacta Group was in the red after it began shipping its rapid Covid tests. The Wetherby firm is behind a 20-minute lateral flow test that has been CE-marked for professional use in the UK and the EU.
Avacta’s share price mushroomed last year, but it has been falling since, and ended down 1.9pc, or 2.5p, to 128p.
There were robust updates from video game developers Keywords Studios and Team 17, which thrived during lockdowns when millions of people turned to their computers and consoles to socialise as well as play.
Technical and creative services provider Keywords (down 3.9pc, or 114p, to 2816p) said turnover was up 37pc and profits by 80pc in the first six months of the year.
Debbie Bestwick, boss of the Wakefield-based developer Team 17, home to the original Worms games, said it was entering the second half ‘in great shape’ in a brief stock market statement. The shares fell 0.6pc, or 5p, to 835p.