Recovery blow for Rolls- Royce
ENGINE maker Rolls- Royce has said it expects to spend more cash than it previously thought as the second surge of coronavirus kept planes on the tarmac and delayed any recovery.
Bosses said cash flow would be negative to the tune of £ 4.2billion this year, up 5 per cent on previous predictions in the summer, but they expect to return to a positive cash position by the second half of next year.
The company has already raised £ 5billion this year to survive the pandemic through tapping up shareholders and borrowing from the Bank of England.
It plans to make cost savings of £ 1.3billion by 2022, including 5,500 job losses by the end of the year, which the company said is on track. A total of 9,000 job cuts are expected, with around two- thirds going in the UK.
Chief executive Warren East said: “We have taken decisive actions to protect and reposition our business in difficult and uncertain trading conditions, including the impact from a second wave of Covid- 19. The outlook remains challenging and the pace and timing of the recovery is uncertain.” Commercial air travel looks likely to recover slowly in the first half of 2021 as airlines reduce capacity, the company added.
Rolls- Royce said it expects an improvement in the second half of 2021 “as vaccination programmes support the further reopening of borders and economic recovery”.
There had been a slow recovery in the number of hours its engines flew on aircraft since the spring. But they remain at just 42 per cent of the levels seen in 2019 in the 11 months to November.
This was lower than the company’s base case forecasts of 45 per cent for 2020 and will be concerning for investors because Rolls- Royce generates most of its civil aerospace revenues from long- term service agreements based on the number of hours flown.
Earlier this month, the company announced details of plans to reduce its manufacturing capacity.
The firm said it must cut its cost base to protect its remaining workforce, with its plans affecting sites in areas including Lancashire and the Midlands.
‘ The outlook is challenging and pace of recovery is uncertain’