27 August 2020 by jbchevrel
Rolls-Royce Plc (ROLLS) is a UK-based engineering company focused on power and propulsion systems. ROLLS segments include Civil Aerospace, Defence Aerospace and Power Systems. ROLLS has been struggling this year due to the collapse in the number of hours flown by its wide-body engines. This is the source of more than 50% of their Civil Aerospace segment revenue. This metric fell -75% in Q2 and -50% in H1. ROLLS burnt roughly -£3b in H1 and will have burnt roughly -£4b in full year 2020. That is what we had learnt earlier this summer, in the trading statement. Today we got the full H1-2020 results: ROLLS lost £5.4b pre-tax during H1-2020. That included impairment charges and write-offs, restructuring costs and a £2.6b non-cash revaluation of currency hedging contracts. Revenue dropped about -25% to £5.8b and operating loss was £1.7b (vs op. profit £203m in H1-2019). ROLLS CDS widened by roughly +20bp today, it under-performed other Main s33 index constituents (-15/+3). On the positive side of things, for credit, ROLLS has been, for months, exploring options to raise funds to fortify their balance sheet. Today CEO East confirmed that ROLLS is hoping to raise at least £2b over the next 18M via asset disposals, including ITP Aero, which had been speculated about since early summer. Liquidity had increased to £8.1b, including undrawn £2b 5-year term loan. From a strategic standpoint, ROLLS defense business has been virtually unaffected by the COVID crisis.