Rolls-Royce ‘at risk’ af­ter £5.4bn loss

The Daily Telegraph - Business - - Front Page - By Si­mon Foy

ROLLS-ROYCE has warned that its fu­ture could be at risk if the Covid down­turn be­comes even more se­vere, af­ter plung­ing to a record £5.4bn half-year loss.

The pre-tax loss for the six months to June in­cluded a near £1.5bn hit from cur­rency move­ments as mar­kets swung vi­o­lently when the pan­demic struck.

Rev­enues sank by a quar­ter to £5.6bn fol­low­ing a col­lapse in air travel that crushed de­mand for the firm’s en­gines, and Rolls also an­nounced its fi­nance chief has a new job.

Bosses are now fight­ing to raise £2bn by sell­ing as­sets in­clud­ing their ITP Aero di­vi­sion, which makes parts for the Eurofighte­r Typhoon.

An­a­lysts at JP Mor­gan said: “Only a very ma­jor cap­i­tal raise would put [Rolls] on a sound footing.” Rolls warned that in a “se­vere but plau­si­ble down­side sce­nario”, un­cer­tain­ties over the sever­ity and du­ra­tion of the dis­rup­tion caused by the pan­demic “rep­re­sent ma­te­rial un­cer­tain­ties that may cast sig­nif­i­cant doubt on the group’s abil­ity to con­tinue as a go­ing con­cern”.

Chief ex­ec­u­tive War­ren East said: “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. Our view is that we’re ex­plor­ing a range of op­tions. We’re not in a great hurry be­cause we have the liq­uid­ity and won’t be forced to do any­thing too quickly.”

On a grim day for the FTSE 100 firm, fi­nance chief Stephen Dain­tith also an­nounced he was leav­ing for on­line gro­cer Ocado.

He was pre­vi­ously fi­nance di­rec­tor at Daily Mail owner DMGT.

The com­pany has been ham­mered by a near-to­tal halt to global air traf­fic, send­ing its shares to their low­est lev­els in a decade and valu­ing the com­pany at just £5bn – a third of the level it was at one year ago.

Shares slumped more than 7pc yes­ter­day, be­fore re­vers­ing their losses to close up 1.4pc at 256.5p.

Rolls also said that un­der­ly­ing free cash flow – a mea­sure of how much money the com­pany has af­ter ex­penses and one of its key met­rics – came in at neg­a­tive £2.8bn, down from neg­a­tive £429m for the same pe­riod last year.

En­gine fly­ing hours, an­other key marker of per­for­mance, were down by 75pc in the sec­ond quar­ter.

Rolls builds en­gines for wide-body air­craft such as the Air­bus A350 and A330 and Boe­ing’s 787 Dream­liner. The firm has been seek­ing to shore up its fi­nances by cut­ting its for­eign ex­change trad­ing book and ax­ing 9,000 jobs.

Yes­ter­day it said that 4,000 peo­ple had al­ready left the busi­ness, with at least 5,000 more ex­pected to go be­fore the end of the year.

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