Rolls ‘may not survive’ after losses hit £5.4bn

Engineer to sell £2bn of assets after posting record £5.4bn loss

ROLLS-ROYCE yesterday warned it was struggling to survive after suffering a record £5.4billion loss following a collapse in air travel in the pandemic.

The jet engine maker – one of Britain’s most prestigious companies – is fighting to shore up its finances.

The Derby-based firm gets paid according to the number of hours flown by planes fitted with its engines.

It only makes engines for larger aircraft that fly long-haul routes which have been badly hit in the crisis.

Rolls believes business will not pick back up to 2019 levels until 2025.

It has already announced plans to cut 9,000 jobs and this week said factories in Nottinghamshire and Lancashire would close. Experts have warned the Government could be forced to step in to save the 114-year-old firm from collapse. In its financial results for the first half of the year, Rolls said a longer downturn could kill off the company.

It insisted the Covid crisis had posed ‘material uncertainties that may cast significant doubt on the group’s ability to continue as a going concern’. Chief executive Warren East said the best thing ministers could do for the com

pany was to make it easier for people to start travelling longer distances again.

The company, which employs 52,000 people, wants to raise £2billion by selling off parts of the business in a restructure. A large chunk of Rolls’ loss – £2. billion – was down to an accounting charge linked to currency movements.

Meanwhile, one of Britain’s biggest transport providers yesterday urged Boris Johnson to ‘lead from the front’ to get commuters back to the office.

The Go-Ahead Group, which operates bus and rail franchises across the UK, wants the PM to reassure Britons public transport is safe to use again.

The firm’s Katy Taylor said passenger numbers were still running below 40 per cent of capacity.

She urged the PM to get on a bus to help dispel fears about safety.

She stressed: ‘If the Government really wants the country to get back to work it has to lead from the front and encourage people back onto the train and bus.’

ROLLS-ROYCE is aiming to raise £2bn by selling parts of its business as it struggles to survive the coronavirus crisis.

The engineer has been hammered by the pandemic, which has triggered a collapse in global air travel and starved it of income it usually makes from servicing plane engines.

Reporting a record first-half loss of £5.4bn, the jet engine maker said it will take until 2025 for demand to recover to 2019 levels.

And it has warned it may not be able to survive the crisis if there is a longer or deeper than expected downturn in the travel industry.

Rolls said it would aim to sell £2bn of assets to shore up its finances.

It confirmed that this will include ditching ITP Aero, a Spanish unit which makes parts for the Eurofighter Typhoon ( pictured).

Boss Warren East said the remainder of the cash would probably be made from selling technologies or parts of businesses, rather than hiving off entire divisions.

And Rolls is expected to tap investors for more cash at a later date by selling new shares.

The company has been scrambling to cut costs and has already announced plans to axe 9,000 jobs and shut factories in Nottinghamshire and Lancashire.

But it said there was a ‘ severe but plausible’ worst- case scenario that ‘may cast significant doubt’ on its ability to continue trading.

The announcement is the latest in a series of blows to the company – and its reputation – over the last few years.

It will fuel worries the state could be forced to step in to save the 114-yearold firm from collapse if it runs into more problems.

East said the other measures it is taking should prevent it from needing a state bailout – but added the company is ‘not ruling anything out’.

He said the best way the Government could help was by encouraging more people to fly again, for example through striking so- called ‘ air bridge’ agreements with countries outside of Europe.

The grave warning about its future came as Rolls reported it racked up a £5.4bn loss in the first half and revealed that finance boss Stephen Daintith will leave for grocery group Ocado.

East said he acknowledged that this looked ‘clumsy’, as Daintith has only been in the job for three years, and that he was ‘ disappointed’ by the move.

Shares dropped by as much as 7pc yesterday – though it pared back some losses and closed down 1.2pc, or 3p, to 250p by the market close. More than £8bn has been wiped off the company’s value this year.

The number of flying hours notched up by its planes – which is where it makes a large proportion of its cash – dropped by around 50pc between January and June as flights were grounded worldwide.

JP Morgan analysts said Rolls needs to raise much more money than it is targeting and said the warning about the company’s future should be taken seriously.

Russ Mould, investment director at AJ Bell, said: ‘The smoke signals from Rolls-Royce have been fairly clear – it needs to do something to prop up its balance sheet and market speculation has long pointed towards a very large equity raise.

‘It’s an odd game to play. The company would be better off making some hard decisions now with regards to issuing new shares, particularly while investors still seem happy to back companies needing more cash during the pandemic.’

Rolls said it was reviewing all its options.