11th Dec 2020 09:07
(Alliance News) - Rolls-Royce Holdings PLC on Friday said its restructuring plans are on track to deliver its targeted GBP1.3 billion cost savings by 2022, and confirmed at least GBP1 billion of near-term cash cost mitigations for 2020.
The London-based engineering company previously said this will involve cutting at least 9,000 jobs by the end of 2022, with more than 5,500 to be cut before the end of 2020. Rolls also completed a GBP5 billion recapitalisation package in November to "increase resilience, strengthen the balance sheet and support long-term strategy."
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. We have made rapid progress on our restructuring programme and the consolidation and reorganisation of our Civil Aerospace footprint is well underway."
The jet-engine maker said the benefits from improving its Civil Aerospace business have been "delayed" due to the impact of the Covid-19 pandemic. Rolls said the unit saw a period of rapid growth and new engine programme launches, while research and development investment demands were falling and returns improving.
"The fundamental drivers of having a more efficient business with stronger margins and better returns remain intact and position us well for the eventual rebound," it added.
Rolls said it expects its 2020 free cash flow to be approximately GBP4.2 billion, subject to timing of year-end working capital cash flows. This will result in a year-end net debt of between GBP1.5 billion and GBP2.0 billion, and liquidity of between GBP8.5 billion and GBP9.0 billion.
The company ended 2019 with net debt of GBP993 million.
The engineering firm has seen its Defence unit remain "resilient" in the last 11 months, with a strong order book and 2021 forecast sales that are "well covered" due to orders for 56 new EJ200 engines for the German Air Force.
Looking ahead, Rolls said it expects to turn its cash flow positive during the second half of 2021, with a target at least GBP750 million free cash flow that excludes disposals as early as 2022, and at least GBP2 billion from disposal proceeds.
East added: "The outlook remains challenging and 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."
Shares in Rolls-Royce were down 7.1% at 117.83 pence in London on Friday morning.
By Zoe Wickens; [email protected]
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