In 2020, Rolls-Royce was burning through £1 billion of cash per month. Its share price had collapsed. Its survival was genuinely in question. Five years later, it is posting record profits and its shares trade at five times their pandemic low.
The Crisis
The pandemic destroyed commercial aviation. For an engine manufacturer whose business model depends on long-term service agreements — earning revenue every time a plane flies — this was catastrophic.
Rolls-Royce had designed its financial model around the assumption that aviation would grow, not contract. The leverage implicit in that model, tolerable during normal times, became existential during an industry shutdown.
The Turnaround Strategy
The new leadership team that arrived in 2023 brought a clarity that had been missing. They identified a simpler, more focused business: fewer product lines, higher margins, genuine competitive advantage in defence and power systems.
The disposal of non-core businesses generated cash and management attention. The restructuring of the workforce — painful in the short term — removed cost that the business could not sustain.
The New Rolls-Royce
Today's Rolls-Royce is smaller than its 2019 version but substantially more valuable. Its nuclear capabilities, including the Small Modular Reactor programme, give it exposure to one of the most important energy investments of the next decade.
