Rolls-Royce in £2.9bn loss as revenue falls to £11.8bn

Derby-based Rolls-Royce said on Thursday its pre-tax loss widened to £2.9 billion in 2020 amid the “severe impact of Covid-19 pandemic” on its performance and near-term outlook.

Revenue fell about 28% to £11.8 billion. Underlying loss before tax was £4 billion included a £1.7 billion underlying finance charge related to a hedge book reduction.

The firm said it has strengthened its liquidity to £9 billion and “protected” its financial position with £7.3 billion of new debt and equity and launched a programme to raise at least £2 billion from disposals.

Rolls-Royce said it has made strong progress on its fundamental restructuring programme with “around 7,000 roles removed in 2020.”

“The worst is now well behind us,” Rolls-Royce CEO Warren East told reporters.

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

East said in the earnings statement: “The impact of the COVID-19 pandemic on the group was felt most acutely by our Civil Aerospace business.

“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.

“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.”

The company said the sale of Rolls-Royce’s Spain-based ITP unit is progressing well and there are ongoing conversations with a number of potential buyers.

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

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

Reuters reported that industry sources say the sale has sparked tensions with Germany’s MTU Aero Engines, a partner of US engine maker Pratt & Whitney.

MTU said last month it not been invited to bid. Rolls-Royce declined to comment.