9th Jul 2020 08:54
(Alliance News) - Rolls-Royce Holdings PLC on Thursday said it plans to cut over 9,000 roles across the company's worldwide operations, as it saw a GBP3.0 billion cash outflow in the first half of 2020 due to the Covid-19 pandemic.
The jet engines maker said the re-organisation is expected to deliver at least GBP1.3 billion in annual pretax cash savings by the end of 2022. It added that it has already received notice for more than 3,000 UK staff for voluntary severance, with two-thirds of the number currently expected to leave by the end of August.
Rolls Royce said the cash outflow included GBP1.1 billion less in cash inflow due to lower receipts, with wide-body engine flying hours down 50% in the first half - and 75% lower in the second quarter - together with lower engine deliveries. A further GBP1.1 billion stemmed from a one-off adverse impact from the cessation of invoice factoring, and the firm also cited increased inventory and debtor balances.
"Our rate of cash outflow is expected to ease in the second half supported by increased benefits from cash mitigation actions, the timing of working capital movements and the anticipated ongoing recovery of commercial aviation from the trough reported in April," the company said.
The company anticipates a gradual recovery in its end markets as travel restrictions ease over the coming months. Wide-body engine flying hours are expected to be down around 55% this year, and it continues to plan for about 250 wide-body engine deliveries in 2020.
The FTSE 100 constituent is targeting GBP750 million free cash flow in 2022.
"These are exceptional times. The Covid-19 pandemic has created a historic shock in civil aviation which will take several years to recover. We started this year with positive momentum and strong liquidity and acted swiftly to conserve cash and cut costs to protect Rolls-Royce during the pandemic," said Chief Executive Warren East.
As at the end of June, Rolls Royce had liquidity of GBP8.1 billion.
Full unaudited results for the first half is slated to be published on August 27.
The stock was trading 8.5% lower at 263.30 pence each on Thursday morning in London and is down 61% since the start of 2020.
By Ife Taiwo; [email protected].
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