MARKET REPORT: Relief for Rolls-Royce as it secures £2bn cash call

Rolls-Royce bosses will be breathing a sigh of relief after it completed a bumper £2billion fundraising that will unlock even more emergency cash.

Britain’s flagship engineering group was aiming to sell 6.5bn new shares to existing investors in what is known as a rights issue.

Rolls earns a hefty chunk of its money from maintaining plane engines, and it gets paid according to the number of hours they fly.

Grounded: Rolls-Royce earns money from maintaining plane engines, and gets paid according to the number of hours they fly. This means they pandemic has hit the company hard

Grounded: Rolls-Royce earns money from maintaining plane engines, and gets paid according to the number of hours they fly. This means they pandemic has hit the company hard

Grounded: Rolls-Royce earns money from maintaining plane engines, and gets paid according to the number of hours they fly. This means they pandemic has hit the company hard

This means the pandemic’s effect on global air travel has dealt the company a hammer-blow and at points virtually wiped out one of its key revenue streams.

Just over 94 per cent of shareholders agreed to take up the offer of new stock – but this means big-name underwriters including HSBC, Morgan Stanley and Citigroup will have to ‘use reasonable endeavours’ to sell the remaining 375m unwanted shares.

Although 94 per cent is a more-than-respectable number, the fact that some investors were unwilling to take up their rights is still embarrassing for the company – particularly when the price of the offer could plausibly have seen it oversubscribed, with shareholders clambering for even more stock.

Regardless, the rights issue was a key part of a £5billion funding package that will now clear the way for it to receive more cash, including £2billion from selling bonds.

Stock Watch – Duke Royalty 

Duke Royalty was a hit with investors after pledging to pay a 0.5p per share dividend for the third quarter.

The royalties group invests in a range of small companies – from a German riverboat cruise operator to a glass merchant – and receives income from their earnings.

It has helped several firms that were in a precarious financial position because of the pandemic. 

And it is looking for companies it could invest in. Shares in group rose 5.2 per cent, or 1.3p, to 26.5p.

In addition to cutting 9,000 jobs, selling off various parts of the business and other wide-ranging cost-cutting measures, Rolls reckons it is now in the position to get through the worst of Covid.

Rolls shares fell 8.6 per cent, or 8.42p, to 90p, sending it to the bottom of the FTSE 100 leaderboard. 

It is the latest see-saw for its share price, which rocketed as much as 90 per cent higher in day-trading after Pfizer’s vaccine announcement on Monday provided lift off for companies that could benefit most from returning to normal.

A stellar eight-day rally also fizzled out across the wider market, with the FTSE 100 closing 0.7 per cent lower, or 43.16 points, at 6338.94, while the FTSE 250 fell 0.2 per cent, or 38.02 points, to 19302.17.

In another sign that the shine was wearing off the vaccine announcement, gold prices – a key safe haven assets – rose by 1pc and sent shares in precious metals companies higher.

Fresnillo climbed 3.7 per cent, or 40.5p, to 1125p, while Polymetal rose 1.9 per cent, or 31p, to 1681.5p.

Astrazeneca reported a Covid-related setback, announcing that its cancer drug Calquence failed to help patients hospitalised with severe coronavirus symptoms.

The drug failed to meet the main goal of mid-stage trials, which are separate from its experimental vaccine programme. 

Shares fell 1.4 per cent, or 125p, to 8660p. And AIM-listed Omega Diagnostics sank 14.3 per cent, or 8p, to 48p despite rejecting media reports about the accuracy of its Covid-19 antibody test. 

It said the Department of Health was satisfied with the test, as well as the UK Rapid Test Consortium.

Hi-tech defence group Qinetiq had a stellar day, barrelling to the top of the mid-cap index after it upped its guidance after its order book surged and first-half profits rose from £71million last year to £84million.

Boss Steve Wadey said the company’s growing focus on cyber intelligence and robotic technology had put it in a ‘sweet spot’ for what its customers were looking for – and will position it well for the wars of the future. Shares rose 11.1 per cent, or 32.2p, to 323.2p.

G4S shareholders were unmoved by the security firm’s latest backlash against Garda World, which is trying to buy G4S for £3billion. Shares fell 0.1 per cent, or 0.3p, to 213.1p.

Garda has cleared key regulatory hurdles in the US and Canada – which G4S brushed off as ‘irrelevant’ given the ‘derisory’ offer and that virtually no G4S shareholders have backed the deal so far.

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