Sunday, July 3, 2022

Contagious Covid variants creating additional uncertainty at Rolls-Royce

Roll-Royce is predicting a mixed picture in 2021. In a trading update the firm noted that while progress on vaccination programmes is encouraging for the medium-term recovery of air traffic and economic activity, in the near-term, more contagious variants of the virus are creating additional uncertainty.

Rolls-Royce said enhanced restrictions are delaying the recovery of long-haul travel over the coming months compared to its prior expectations, placing further financial pressure on customers and the wider aviation industry, all of which are impacting the firm’s own cash flows in 2021.

The company added: “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 £2 billion in 2021. This is based on 2021 widebody engine flying hours at around 55% of 2019 levels (compared to the base case of 70% 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.”

Rolls-Royce further noted that with liquidity of approximately £9 billion, it is “confident that despite the more challenging near-term market conditions,” it is “well-positioned for the future.”

The business remains focused on completing its restructuring programme and footprint consolidation as well as maintaining cost control and capital discipline. During 2020 around 7,000 roles were removed as part of a target to remove at least 9,000 roles by the end of 2022. Rolls-Royce said: “This restructuring will be a key enabler of our target to deliver at least £750 million of free cash flow (excluding disposals) as early as 2022, contingent on the expected recovery in engine flying hours.”

Reflecting on December, the firm indicated that trading was broadly in line with expectations across all business units. Full year 2020 Group free cash outflow was in line with previous guidance, and in-year cash cost savings of more than £1 billion were achieved from mitigating actions.

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 pandemic having a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £33.60 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.

Latest news

Related news

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.