Rolls-Royce in its financial report published today, has admitted that it failed to ring the cash registers, with worldwide grounding of aircraft, order cancellations and crisis in air transport sparked by COVID-19 pandemic.
The British firm, which operates in the air, defense and energy sectors, posted a net loss of £5.4 billion ($7.1 billion) in the six months to June.
“The COVID-19 pandemic has significantly affected our 2020 performance, with an unprecedented impact on the civil aviation sector with flights grounded across the world,” Warren East, Chief Executive, Rolls-Royce, remarked.
He added that the company responded to the crisis by increasing liquidity, with £6.1 billion ($8 billion) at the end of H1 and a further £2 billion ($2.64 billion) term loan agreed in H2.
The company has also ramped up its cash holdings to help navigate the damaging fallout from the ongoing global health emergency.
The most pronounced effect was seen in Civil Aerospace with large engine deliveries and flying hours both down around 50% in H1 including a 75% reduction in engine flying hours in Q2, however business jets and regional flying hours were more resilient. In Power Systems, which was less severely impacted than Civil Aerospace, industrial markets were suppressed, economic disruption and lower utilisation impacted demand for services while government marine was stable. Defence remained resilient with no material impact on results from the pandemic and delivered strong profit growth. ITP Aero was impacted by the same adverse industry trends as Civil Aerospace.
In May, Rolls-Royce announced it gave the pink slip to 9,000 employees, or 17% of its global workforce.
“We are implementing a range of initiatives to return to positive free cash flow during H2 2021, and to then deliver strong and sustained cash flow from FY2022 onwards. In addition, we are reviewing our portfolio to identify assets that are no longer key to our future strategy to raise proceeds of at least £2 billion ($2.64 billion) within the next 18 months. We have identified various assets for potential disposal, including ITP Aero, and the appropriate preparation work is under way. We will also explore options to increase the scope of ITP Aero’s supply chain and manufacturing activities,” the company stated.
"Furthermore, in light of ongoing uncertainty in the civil aviation sector, we are continuing to assess additional options to strengthen our balance sheet to enable us to emerge from the pandemic well placed to capitalize on the long-term opportunities in all our markets,” he added.