11th Mar 2021 09:02
(Alliance News) - Rolls-Royce Holdings PLC on Thursday revealed it burned through GBP4.2 billion in 2020 and swung to a deeper-than-expected loss, in a year that grounded its airline customers due to the coronavirus pandemic.
The jet engine maker reported revenue of GBP11.82 billion for 2020, down 29% from GBP16.59 billion the year before, while underlying revenue was GBP11.76 billion, down 24% from GBP15.45 billion. This was above company-compiled consensus of GBP11.10 billion underlying revenue.
Rolls-Royce's reported pretax loss deepened to GBP2.91 billion from GBP891 million, while it swung to an underlying pretax loss of GBP3.96 billion from a profit of GBP583 million. The underlying pretax loss undershot consensus, with analysts having pencilled in GBP3.14 billion.
"Our financial performance in 2020 was significantly affected by the Covid-19 pandemic. The global spread of the virus from March resulted in a sudden deterioration of some of our end markets. A positive albeit reduced contribution from Power Systems and growth in Defence were important to the group's overall performance, partly offsetting the severe impact to our Civil Aerospace business," said Rolls-Royce.
No dividend will be paid for 2020. The firm back in April cancelled its 2019 final shareholder payment of 7.1 pence due to the pandemic grounding aircraft around the world.
Shares in Rolls-Royce were up 1.0% at 114.16p in London on Thursday.
Rolls-Royce said its cash outflow for the year was a particularly large GBP4.19 billion, compared to an inflow of GBP873 million in 2019, though this was in line with analyst expectations. This reflected a deterioration in its underlying performance due to the pandemic, and the hit to its Civil Aerospace division in particular.
"In response, we took immediate actions to address our cost base, launching the largest restructuring in our recent history, consolidating our global manufacturing footprint and delivering significant cost reduction measures. We have taken decisive actions to enhance our financial resilience and permanently improve our operational efficiency, resulting in a regrettable, but unfortunately very necessary, reduction in the size of our workforce. With the support of our stakeholders we successfully secured additional liquidity with a rights issue, bond issuance and further credit facilities put in place during the year," said Chief Executive Warren East.
Rolls-Royce said it expects a cash outflow of around GBP2.0 billion in 2021 and anticipates becoming cash flow positive "at some point" during the second half of this year. Engine flying hours for 2021 are forecast at around 55% of 2019 levels, but the company said things could be worse.
"Our severe but plausible downside scenario assumes approximately 45% engine flying hours in 2021 and 70% in 2022, both compared to the 2019 level," said Rolls-Royce. A base case of 70% was presented in October.
Looking ahead, Rolls-Royce said it expects "gradual" market recovery in 2021, with a somewhat slow start to the year, but will then see an acceleration in the second half as travel restrictions ease.
"We have made a good start on our programme of disposals and will continue with this in 2021. We continue to invest in developing market-leading technology and low carbon opportunities in all our end markets, to create value for our stakeholders and ensure we are well positioned to take advantage of the transition to a lower carbon economy and growing demand for more sustainable power solutions," said East.
In December, Rolls-Royce unveiled restructuring plans 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.
Additionally, a total of 9,000 redundancies by the end of 2022 were announced, with more than 5,500 to be cut before the end of 2020 as part of the GBP1.3 billion cost saving target.
Rolls-Royce said it has appointed Paul Adams as a non-executive director with immediate effect.
Adams is currently a non-executive director at OC Oerlikon Corp AG and Aerion Supersonic.
"[Adams] has deep experience across the aerospace industry and in engine manufacturing in particular, gained from over 30 years of leadership experience in the aviation industry," said Chair Ian Davis.
In addition, Lewis Booth, Frank Chapman and Jasmin Staiblin are to step down from the board as of May 13. Booth and Chapman completed their nine-year terms in 2020 and were re-elected, while Staiblin will finish her nine-year term in May.
By Zoe Wickens; [email protected]
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