6th Apr 2020 09:19
(Alliance News) - Jet engine maker Rolls-Royce Holdings PLC on Monday suspended its shareholder payout, withdrew financial guidance for 2020 and secured a new loan amid the grounding of aircraft around the world due to the Covid-19 pandemic.
Shares were up 15% at 288.13 pence each in London, one of the top performers in the FTSE 100 index.
Rolls-Royce makes engines for planes manufactured by Boeing Co and Airbus SE and generates significant revenue from servicing those engines. In February, it had retained its guidance for fixing Trent 1000 engines and had said that it remained on track to reduce aircraft on the ground for repairs to single digits by the end of the second quarter of 2020.
Rolls Royce on Monday said: "Widebody flying hours fell by approximately 25% in the first quarter, compared to the prior year, and fell approximately 50% in March, with an expected further deterioration in April and beyond as airlines have grounded an increasing proportion of their fleets over the last few weeks."
In response to the change in outlook resulting from the global spread of Covid-19 and to ensure cash headroom in the event of a prolonged reduction in trading activity, Rolls-Royce took the precautionary decision in March to draw fully on its GBP2.5 billion revolving credit facility, it said.
London-based Rolls-Royce also secured an additional GBP1.5 billion revolving credit facility commitment with a consortium of banks, increasing its overall liquidity to GBP6.7 billion.
The company also has decided to cancel a final shareholder payment of 7.1 pence per share with respect to 2019.
"We are executing a number of specific mitigations to reduce our cash expenditure which will have a cash flow benefit of at least GBP750 million in 2020 in addition to our ongoing transformation plans," the company explained.
These mitigations include minimising discretionary costs, ceasing all non-essential travel, postponing external recruitment, and reducing salary costs across global workforce by at least 10% in 2020. Salaries for the company's senior managers and executive team will be cut by 20% for the rest of 2020, comprising a reduction of 10% and a deferral of 10%, with an additional bonus deferral for the chief executive officer and chief financial officer.
The company also plans to reduce fees for non-executive directors for the remainder of the year.
CEO Warren East said: "We find ourselves in unprecedented times, both as a company and as a key player in vital power markets across the world. We are taking significant measures to strengthen the operational and financial resilience of our business."
By Tapan Panchal; [email protected]
Copyright 2020 Alliance News Limited. All Rights Reserved.
Related Shares:
Rolls-Royce