Rolls-Royce reports £5.4 billion loss following Covid-19 disruption

Rolls-Royce has slumped to a £5.4 billion loss and said 4,000 staff had now left the business in the wake of the aviation crisis triggered by Covid-19.

The engine giant's half-year results included a £1.5 billion slump in civil aerospace revenues after large engine flying hours fell by 80% at the height of global pandemic lockdowns.

Rolls is now targeting disposals worth £2 billion and is looking at other ways to shore up its balance sheet, which analysts think may need to include a £1.5 billion City fundraising.

A restructuring plan announced in May also aims to remove 8,000 roles from the civil aerospace division, with another 1,000 from central functions. Some 4,000 jobs have already been removed, with this figure set to rise to 5,000 by the end of the year across facilities in the UK, Germany and Singapore.

This figure includes 2,500 voluntary severance and early retirement agreements in the UK, which Rolls hopes will substantially reduce the need for compulsory redundancies.

The pressure on the balance sheet was revealed in today's results after the group went from a net cash position of £1.4 billion at the end of 2019 to net debt of £1.7 billion.

Rolls said: “Based on our market assumptions and despite the mitigating actions we are taking, we expect our net debt position to have significantly increased by the end of 2021.” The company hopes to be generating cash again by the second half of next year.

In the meantime, it has boosted its liquidity position to £8.1 billion, including through a partial guarantee from the government's UK Export Finance programme.

Today's bottom-line loss includes the unwinding of some currency hedging contracts due to the expected shortfall in orders for the next seven years. Even without this, it reported an operating loss of £1.8 billion due to impairments and other write-offs.

Chief executive Warren East said: “We have made significant progress with our restructuring, which includes the largest reorganisation of our civil aerospace business in our history.

“This restructuring has caused us to take difficult decisions resulting in an unfortunate but necessary reduction in roles.”