(Alliance News) - Rolls-Royce on Monday said its Rolls-Royce North America unit has been selected by the US Air Force to provide the powerplant for the Boeing B-52 Stratofortress under the Commercial Engine Replacement Program, in an award worth a potential USD2.6 billion.
The single award contract provides for 608 military derivative commercial engines, plus spare engines, associated support equipment and commercial engineering data, to include sustainment activities, to be used on the B-52H bomber fleet, the US Air Force said on Sunday.
The Pentagon made the announcement after a multi-year competition, which saw Rolls-Royce beat out US rivals General Electric and Pratt & Whitney for the lucrative contract.
As part of the deal, Rolls-Royce will build and test the F130 engines at its Indianapolis, Indiana, facility following the recent completion of a USD600 million investment in the manufacturing campus. The B-52 CERP win creates demand for 650 engines to be produced at the site.
The B-52 has been in service with the US Air Force since 1955 and was built to carry nuclear weapons on Cold War-era deterrence missions. Rolls-Royce noted that it has provided jet engines to the US Air Force for more than 70 years.
Craig McVay, senior vice-president of Strategic Campaigns for Rolls-Royce Defence said: "This is a major win for Rolls-Royce. We've been planning and preparing for this outcome and are ready to hit the ground running to prove that we are the best choice for the Air Force and the B-52."
Commented Major General Jason Armagost, director of Strategic Plans, Programs & Requirements at Headquarters Air Force Global Strike Command, Barksdale Air Force Base, Louisiana. "The B-52 Commercial Engine Replacement Program is the most important and comprehensive upgrade to the B-52 in over half a century.
"The B-52 is the workhorse of the nation's bomber force and this modification will allow the B-52 to continue its critical conventional and standoff mission into 2050's."
Rolls-Royce shares were up 4.2% early Monday.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.9% at 7,113.84
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Hang Seng: up 0.1% at 24,212.31
Nikkei 225: closed marginally lower, down 8.75 points at 30,240.06
DJIA: closed up 33.18 points, or 0.1%, at 34,798.00
S&P 500: closed up 0.2% at 4,455.48
Nasdaq Composite: closed down 4.55 points at 15,047.70
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EUR: up at USD1.1720 (USD1.1710)
GBP: soft at USD1.3663 (USD1.3670)
USD: down at JPY110.65 (JPY110.73)
GOLD: up at USD1,758.85 per ounce (USD1,751.33)
OIL (Brent): up at USD79.19 a barrel (USD77.86)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Monday's Key Economic Events still to come
1000 CEST EU monetary developments in euro area
0830 EDT US advance report on durable goods
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Ofgem has appointed Octopus Energy to take on Avro's 580,000 customers after the supplier collapsed last week. The UK energy regulator said Octopus, which specialises in sustainable household gas and electric, had been chosen after a "competitive process" to get the best deal for Avro's clients. It said outstanding credit balances owed to existing and former Avro customers will be paid, and householders transferred to Octopus will be protected by the energy price cap. Separately, Sky News reported on Saturday that Octopus is among the parties seeking information about the finances of rival Bulb. Financial advisers to Bulb have set up a data room in an attempt to secure new funding, Sky said, and Octopus has requested access. Bulb has some 1.7 million customers in the UK and like other smaller energy suppliers is struggling with higher wholesale prices that it is unable to pass onto customers. Last week, Bulb scrapped its new customer referral scheme. Ofgem said supplies to Avro customers will continue as normal when they are switched to Octopus.
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A quick resolution to coalition talks in Germany is unlikely, analysts said, after outgoing Chancellor Angela Merkel's conservative Christian Democratic Union/Christian Social Union bloc was narrowly beaten in the polls. Olaf Scholz and his Social Democratic Party, or SPD, are best-placed after Sunday's election, winning 25.7% of the vote. Merkel's preferred contender Armin Laschet secured 24.1%, in a record low performance for the CDU/CSU bloc. However, with coalition talks set to begin, it is not guaranteed that the party currently in government will give up power in the Bundestag, even if their opponents would argue that they lack a mandate.
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BROKER RATING CHANGES
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MORGAN STANLEY RAISES ROLLS-ROYCE PRICE TARGET TO 134 (106) PENCE - 'EQUAL-WEIGHT'
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DEUTSCHE BANK RAISES WIZZ AIR PRICE TARGET TO 6450 (6000) PENCE - 'BUY'
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BARCLAYS RAISES OLD MUTUAL TO 'OVERWEIGHT' ('EQUAL WEIGHT') - TARGET 87 (70) PENCE
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COMPANIES - FTSE 100
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United Utilities said trading in the six months to September 30 is in line with company's expectations. The water company said revenue for the first half is expected to be higher than the first half of last year, mainly reflecting higher consumption, only partially offset by regulatory revenue reduction. The company explained household consumption remains high, as many customers continue to work from home, and consumption from businesses has started to return to pre-Covid levels as restrictions are lifted. United Utilities said the net increase in revenue in the first half of the year is expected to be around 4%. It posted interim revenue of GBP894.4 million last year. In addition, United Utilities said underlying operating profit for the first half is expected to be higher than last year. This largely reflects higher revenue and targeted efficiencies, partly offset by higher underlying operating costs, largely as a result of inflationary increases in core costs, it noted.
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Hikma Pharmaceuticals said it has agreed to acquire Carlsbad, California-based Custopharm from Water Street Healthcare Partners for USD375 million, with a further USD50 million upon achieving commercial milestones. Custopharm is a generic sterile injectables company with a differentiated product portfolio and R&D pipeline, Hikma said. It currently markets its products in the US through its commercial arm Leucadia Pharmaceuticals. Hikma said the acquisition complements its own injectable product portfolio and pipeline, adding 13 approved products and additional pipeline products. Further, Hikma expects the acquisition to generate annual revenue "in excess of" USD80 million and for the acquisition to be accretive to Hikma's Injectables operating margin. The deal also enhances its research & development capabilities, Hikma added.
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COMPANIES - FTSE 250
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IWG Chief Executive Mark Dixon is exploring breaking up the firm into several distinct companies, Sky News reported. Dixon is looking at options including a US listing for Worka, IWG's app that allows customers to book office space. The listing could be through an initial public offering or a merger with a special purpose acquisition company, Sky said, citing insiders. IWG, based in Zug, Switzerland, provides serviced office space around the world at its own buildings, as well as franchising its brands. Under the plans being considered, IWG's owned-property unit would be separated from its franchising business. Dixon is said to believe the true value of the company's assets is double its GBP2.89 billion market capitalisation, and a breakup would help realise that value, Sky reported. Dixon holds a 28.5% stake in the FTSE 250 constituent, according to Morningstar.
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COMPANIES - MAIN MARKET, AIM AND OTHER
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UK fintech firm PrimaryBid has recruited Donald Brydon as the company's new chair, Sky News reported. Previously, Brydon was the chair of engineering firm Smiths Group and Royal Mail. He is also the former chair of one of PrimaryBid's shareholders, London Stock Exchange Group. This week he plans to retire as chair FTSE 100 software firm Sage Group. Founded in 2016, PrimaryBid gives individuals access to one-off company fundraises by using a mobile app to combine stock orders from small investors into more substantial applications.
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COMPANIES - GLOBAL
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UniCredit and the Italian government are closer to securing a deal which will see the Milan-based company acquire Banca Monte dei Paschi di Siena, Bloomberg reported on Friday. Citing people familiar with the matter, Bloomberg noted a preliminary agreement could even be struck by the end of 2021. It is a deal which could cost the Italian government more than EUR10 billion. A deal with lender UniCredit will not be finalised until the conclusion of an election for a parliamentary seat in Siena, the Tuscan city where Monte dei Paschi is based. The elections are in early-October. UniCredit confirmed last month it was in exclusive discussions to buy parts of Monte dei Paschi. In 2017, MPS was bailed out by the Italian government, which is now the majority shareholder.
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Monday's Shareholder Meetings
Van Elle Holdings PLC - AGM
Ruffer Investment Co Ltd - EGM re granting authority to issue shares
Tiziana Life Sciences PLC - GM re changing corporate structure
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By Tom Waite; thomaslwaite@alliancenews.com
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