Rolls-Royce plans £2bn sell-off after posting huge loss
Derby-based Rolls-Royce made a hefty reported loss of £5.4bn in the first six months of the year, after the Covid-19 pandemic demolished the passenger flight sector.
The firm also saw revenues drop by a quarter to £5.8bn during a time which boss Warren East said had “an unprecedented impact” on the civil aviation sector, with fights grounded across the globe.
Rolls said that it has saved £350m in the first half of the year, against a target of £1bn in cuts by the end of 2020, and that over 4,000 jobs have been cut this year so far, with another 5,000 to go before Christmas. The company has taken out a £2bn loan to see it through the rest of the the year.
The company also said it is targeting potential disposals, including its ITP Aero business, along with “other assets”, and that it is “reviewing a range of options” to strengthen its balance sheet.
Meanwhile, Rolls-Royce’s finance chief Stephen Daintith is set to leave the company to join grocery giant Ocado. The Board says it has begun a process to identify and appoint a successor.
Yesterday, Rolls-Royce also revealed it is set to close its Annesley, Nottinghamshire, plant. The company said it hoped that most staff would be transferred to its Derby site.
Warren East, chief executive said: “We ended 2019 with good operational and financial momentum. However, 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.
“We have responded rapidly to increase our liquidity, with £6.1bn at the end of H1 and a further £2.0bn term loan agreed in H2, to help weather the continued uncertainty around the timing and shape of the recovery in the civil aviation sector. We have made significant progress with our restructuring, which includes the largest reorganisation of our Civil Aerospace business in our history.
“This restructuring has caused us to take difficult decisions resulting in an unfortunate but necessary reduction in roles. These actions will significantly reduce our cost base, which combined with recovery in Power Systems and continued resilience in Defence, will help us to deliver significantly improved returns as the world recovers from the pandemic.
“While our actions have helped to secure the Group’s immediate future, we recognise the material uncertainties resulting from COVID-19 and the need to rebuild our balance sheet for the longer term. We have identified a number of potential disposals that are expected to generate proceeds of more than £2bn, including ITP Aero and a number of other assets.
“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 capitalise on the long-term opportunities in all our markets.”