Rolls Royce plunges to £4bn annual loss as pandemic grounds aviation industry
Engine-maker Rolls-Royce has plummeted to a mammoth £4 billion annual loss.
The manufacturer, which has a factory at Barnoldswick, Lancashire, took a “severe” hit from the pandemic as the crisis hammered the global aviation industry.
The group’s eye-watering loss for last year was worse than expected and compares with underlying pre-tax profits of £583 million in 2019.
On a statutory basis, Rolls reported pre-tax losses of £2.9 billion against losses of £891 million in 2019.
Rolls said there had been a “severe impact of Covid-19 pandemic on group performance and near-term outlook”, warning 2021 was still uncertain for the firm and its sector.
But the group stood by its forecast for cash outflow to improve in 2021.
Workers at Barnoldwick had taken strke action over fears for their jobs when Rolls Royce unveiled plans to transfer some work overseas.
But a deal was struck giving the site a brighter future as the company’s centre of training and excellence.
Its cash outflow stood at £4.2 billion in 2020, but Rolls forecast this would improve this year to an outflow of around £2 billion and is set to turn positive at some stage during the second half.
The group said it had taken swift action to slash costs by an extra £1 billion amid aims to save a total of £1.3 billion by 2022, including 7,000 job losses in 2020.
A total of 9,000 job cuts are expected in total under the programme, with around two thirds going in the UK.
It has also raised £7.3 billion to survive the pandemic through tapping up shareholders and borrowing from the Bank of England, with plans to raise at least £2 billion from selling off some parts of the business.
Warren East, chief executive of Rolls-Royce, said: “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.”