Connect with us

WORLD

Rolls-Royce says worst over after record loss

Published

on

The worst of the Coronavirus (COVID-19) crisis is over for Rolls-Royce, after the engine maker plunged to a record 4 billion pound (5.6 billion dollars) underlying loss for 2020 as its airline customers stopped flying.

Rolls-Royce CEO, gave the forecast on Thursday in London.

The British company said its cash burn should halve this year, and turn positive in the second half as vaccinations kick in and travelers return to the skies.

“The worst is now well behind us,” CEO Warren East said.

“But even if that proves optimistic, Rolls is well placed to cope with more turmoil after a drive to cut costs and raise funds.

“We have our cash burn under control, we have ample liquidity to get through this crisis as long as it lasts,” East said.

Rolls’ model of charging airlines for the number of hours its engines fly meant much of its income dried up last year when travel stopped, forcing it to ask shareholders for cash and take on 5.3 billion pounds of new debt.

Its civil aerospace arm, whose engines power Airbus A350 and Boeing 787 jets, accounts for just over half of group revenue in a normal year.

Last year’s cash burn of 4.2 billion pounds was in line with analysts’ expectations, and Rolls guided that would reduce this year to 2 billion pounds.

The company axed 15 per cent of staff in 2020 and earmarked 2 billion pounds of assets for sale to repair its balance sheet.

Rolls, founded in 1906 and one of the last vestiges of Britain’s once-mighty manufacturing industry posted an underlying pretax loss of 4 billion pounds for 2020, worse than analyst expectations for a 3.1 billion pound loss and its biggest ever on an underlying basis.

Rolls shares were up 2 per cent to 115 pence at 0950 GMT.

They have lost 41 per cent since the start of the pandemic around a year ago, but have gained 22 per cent in the last month on travel recovery hopes.

Jefferies analyst Sandy Morris said Rolls had “much to do”, but the “fix” was feasible.

“The possibility of reaching modest net debt by end 2023 is alive,” he said.

Rolls’ cash flow improvement this year depends on airlines flying 55 per cent of 2019 levels during 2021.

Its assumption is for more travel later this year as vaccine programmes progress.

The sale of Rolls’ Spain-based ITP unit was expected to be its biggest disposal, progressing well and there were ongoing conversations with a number of potential buyers.

“We’re open to approaches from any party with a credible offering at the moment.

“That includes being open, by the way, to discussions with potential Spanish investors or partners,” East said.

Part of Rolls’ asset sale plan ran into problems this week when Norway suspended the 150 million euro sale of Rolls’ Norwegian unit, Bergen Engines, on security grounds.

Cecilia Odey

NEWSVERGE, published by The Verge Communications is an online community of international news portal and social advocates dedicated to bringing you commentaries, features, news reports from a Nigerian-African perspective.A unique organization, founded in the spirit of Article 19 of the Universal Declaration of Human Rights, comprising of ordinary people with an overriding commitment to seeking the truth and publishing it without fear or favour.The Verge Communications is fully registered with the Corporate Affairs Commission of the Federal Republic of Nigeria as a corporate organization.

Comments
JoinOurWhatsAppChannel