ROLLS-ROYCE “WELL POSITIONED” AFTER MAJOR RESTRUCTURE

Rolls-Royce has said it is “well-positioned” for the future after implementing a series of actions in 2020 to help it through the Covid-19 pandemic. The engineering giant also confirmed it cut about 7,000 roles last year which the company described as “good progress” towards its target of at least 9,000 by the end of 2022.

The Derby-headquartered listed business added that the restructuring will be a “key enabler” of its aim to deliver at least £750m of free cash flow, excluding disposals, as early as next year, “contingent on the expected recovery in engine flying hours”.

In a statement to the London Stock Exchange, Rolls-Royce also said that its 2020 group free cash flow was in line with previous guidance and in year cash cost savings of more than £1bn were achieved from its mitigating actions.

Its year-end liquidity was about £9bn, at the upper end of its previous guidance range.

The statement added: “Continued progress on vaccination programmes is encouraging for the medium-term recovery of air traffic and economic activity.

“In the near-term, however, more contagious variants of the virus are creating additional uncertainty.

“Enhanced restrictions are delaying the recovery of long-haul travel over the coming months compared to our prior expectations, placing further financial pressure on our customers and the wider aviation industry, all of which are impacting our own cash flows in 2021.

“In this environment, financial forecasts remain highly sensitive to changes in external conditions and, while we are continuing to drive cost reduction, our current forecasts indicate a free cash outflow in the region of £2bn in 2021.

“This is based on 2021 wide-body engine flying hours at around 55 per cent of 2019 levels (compared to the base case of 70 per cent presented on 01 October 2020).

“Though significant uncertainty remains over the precise shape and timing of the recovery in air traffic and the phasing of engine (OE) concession payments, free cash outflow this year is forecast to be heavily weighted towards the first six months.

“We continue to expect to turn cash flow positive at some point during the second half, reflecting our forecasted profile of flying hours as they recover from today’s low base.”