Rolls-Royce says outlook remains ‘challenging’

ROLLS-ROYCE is expecting to burn through more cash this year as the Covid-19 pandemic continues to blight the recovery of its civil aerospace division.

The engineering giant said on Friday it was “making progress” on its cost-cutting plan, which involves axing 9.000 global jobs by 2022, but expected free cash flow this year of £4.2billion.

The company, which has civil aerospace divisions in Derby and Filton, near Bristol, said its restructuring plan was on track to deliver £1.3billion cost savings in the next two years.

However, chief executive Warren East said the outlook remained “challenging”.

He said: “The pace and timing of the recovery is uncertain. However, our actions have given us a strong foundation to deliver better returns as our end markets improve and we continue to drive our ambition of delivering more sustainable power to support the creation of a net zero carbon economy.”

Rolls-Royce said it expected to turn cash flow positive at some point during the second half of 2021 and added that news on a vaccine was encouraging.

The company said it was expecting commercial air travel to recover slowly in the first half of next year, reflecting the reduced winter schedules planned by the airlines and continuing the trends seen in the second half of 2020.

“We anticipate an improvement in the second half of 2021 as vaccination programmes support the further reopening of borders and economic recovery,” the company said.

Rolls-Royce added that it was on track to cut 5,500 jobs by the end of the year.

The trading update comes just days after the business revealed details of its plans to cut manufacturing capacity following the big drop in orders from airlines due to the grounding of flights during lockdown.

As part of the plans, RollsRoyce is proposing to transfer its facility and workforce in Hucknall, Nottinghamshire, to its ITP Aero subsidiary, which it could eventually sell off.

Its said selling ITP could help generate more than £2billion.