United Kingdom

Rolls-Royce shares surge to 18-month high

Rolls-Royce shares surged to an 18-month high amid further signs the company is bouncing back from the pandemic. 

The engineering giant saw its stock rise 11.3 per cent, or 14.98p, to 147.48p – taking gains from this month alone to almost 28 per cent. 

Analysts said the firm 'finally seems to be leaving the pandemic storm clouds behind'. 

Bouncing back: Rolls-Royce saw its stock rise 11.3 per cent, or 14.98p, to 147.48p – taking gains from this month alone to almost 28 per cent

The rally came as Rolls: 

The triple-whammy is the latest news to boost the Rolls share price this month. 

The company has already been lifted by US plans to reopen its borders to Britons and Europeans for the first time since the pandemic hit – kick-starting transatlantic air travel. 

Rolls also looks set to play a role in supplying Australia with submarine reactors in the new AUKUS security pact. 

The share price is still below the level the group was trading at before the pandemic sent markets into freefall in February 2020 – and is a far cry from its 402p all-time peak in 2014. But the jump indicates Rolls is on track to recover from the worst ravages of the Covid crisis. And it is likely to boost confidence in chief executive Warren East, who has been trying to turn Rolls around ever since he took charge in 2015. 

Michael Hewson, chief market analyst at CMC Markets, said the news showed the 'stars finally appear to be aligning for this major UK blue-chip'. And Susannah Streeter, senior markets analyst at Hargreaves Lansdown, said the US deal in particular was 'yet another ray of sunlight for the engineering firm, which finally seems to be leaving the pandemic storm clouds behind'. 

Derby-based Rolls was hammered by the slump in international travel since the pandemic started, as it earned around half of its income before the coronavirus hit from servicing engines on long-haul planes. It swung to a £4billion loss last year but recently returned to profit at its half-year results. 

To combat the hit from the pandemic, East kicked off a wide-ranging restructuring that included cutting 9,000 jobs from its 52,000-strong workforce, raising £5billion of emergency funds, and aiming to sell at least £2billion of businesses. The sale of Spanish division ITP Aero, which makes parts for the Eurofighter Typhoon jet, has long been expected – but Rolls revealed yesterday it has agreed to sell it to a consortium led by private equity group Bain for £1.5billion. 

The deal brings Rolls close to its sales target when two other recent deals in Norway and the UK are taken into account. 

In another vote of confidence, the US Air Force has agreed a £1.9billion deal to supply engines for 76 B-52 fighter jets. Weekend reports suggest a Rolls-led project to design and build small modular reactors could be about to win Government backing of hundreds of millions of pounds. 

Nick Cunningham, analyst at Agency Partners, said: 'These specific bits of news are partly about luck and partly about things East has been working on.

'But it's the overall rescue of Rolls from the jaws of doom that he will be remembered for.' 

US GENERALS BACK UK NUCLEAR PLANS 

A group of retired American generals and admirals are in talks with the Government to invest billions in mini-nuclear reactors in the UK.

Investment company IP3 – which has a number of senior US military figures on its board – wants to plough money into the small modular reactor (SMR) project led by Rolls-Royce. 

The reactors are seen by many as a key energy resource in future because they are so much quicker to build than huge stations such as Hinkley Point C. IP3 – which focuses on promoting and investing in the nuclear power industry – is keen to get the project up and running as soon as possible.

It was set up by retired US Navy rear admiral Michael Hewitt, its chief execuctive, along with board members Robert 'Bud' McFarlane, a former security adviser to president Ronald Reagan, and retired US Army generals Jack Keane and Keith Alexander. 

The structure of a potential deal and the amount of funding IP3 might offer has not been pinned down yet.

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