Monday, November 23, 2020

Rolls-Royce minimises discretionary costs and cuts salaries in response to COVID-19

Rolls-Royce has revealed measures to cut costs in the wake of the novel Coronavirus.

The company has said it is “executing a number of specific mitigations to reduce [its] cash expenditure which will have a cash flow benefit of at least £750 million in 2020 in addition to [its] ongoing transformation plans.”

These moves include minimising discretionary costs such as non-critical capital expenditure projects, consulting, professional fees and sub-contractor costs, ceasing all non-essential travel and postponing external recruitment. Salary costs will also be reduced across Rolls-Royce’s global workforce by at least 10% in 2020, subject to local legal requirements.

Salaries for senior managers and the Executive Team will be reduced by 20% for the rest of 2020, comprising a reduction of 10% and a deferral of 10%, with an additional bonus deferral for the CFO and CEO. There will also be a corresponding reduction in fees for Non-Executive Directors of the Board for the remainder of the year.

In addition, the Board has decided they are no longer recommending a final shareholder payment of 7.1 pence per share in respect of 2019, equivalent to a further £137 million.

In response to a change in outlook resulting from the global spread of COVID-19, in March Rolls-Royce made the decision to draw fully on its £2.5 billion revolving credit facility. Including this cash, which has been placed on short-term deposit, the company’s current gross cash balance is £5.2 billion. It has also secured an additional £1.5 billion revolving credit facility commitment with a consortium of banks, which will increase overall liquidity to £6.7 billion.

The primary impact from COVID-19 so far has been on engine flying hours in Rolls-Royce’s Civil Aerospace business. Widebody flying hours fell by approximately 25% in the first quarter, compared to the prior year, and fell approximately 50% in March, with an expected further deterioration in April and beyond as airlines ground fleets.

Warren East, CEO, said: “We find ourselves in unprecedented times, both as a company and as a key player in vital power markets across the world. Our priority is to do everything we can to safeguard the lives and livelihoods of our people and to play our part in helping our customers, partners and communities.

“We are taking significant measures to strengthen the operational and financial resilience of our business. I would like to thank all our 52,000 colleagues worldwide for their support, dedication and hard work at this time when difficult decisions are being made.”

Rolls-Royce is part of the VentilatorChallengeUK Consortium which is working to increase the UK’s supply of ventilators. Its role in the consortium is to organise a parallel supply chain to feed in materials as quickly as possible to a number of new assembly plants.

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

Recruitment specialist expands in Leicester

Recruitment specialist, Thorn Baker Industrial Recruitment, has taken larger office space at Charles Street in Leicester city centre to facilitate the further expansion of...

Work starts on 80-home development in Rushden

Davidsons Homes has started work on a development of 80 new homes after purchasing seven acres of land in Rushden. The company has full planning...

Double deal at Leicestershire business park

Specialist Property Consultant and Chartered Surveyor, Wells McFarlane has completed two transactions at Arkwright Hill Farm Business Park, Leicestershire, representing more than 12,000 sq...

Check your company’s bandwidth ahead of Black Friday

To ensure companies make a success of Black Friday, Nottingham web agency, Strafe Creative, is stressing the importance of preparation and encouraging firm’s to...

Congestion concerns see council object to 3,200-home development

Lincolnshire County Council has submitted an objection to plans for the Western Growth Corridor development which would see 3,200 new homes built on land...

Related news

Adzooma and Revolut Business launch industry first

Revolut, the growing UK technology company, and international online advertising platform, Adzooma, have announced they will be providing Revolut Business customers with an advertising...

Recruitment specialist expands in Leicester

Recruitment specialist, Thorn Baker Industrial Recruitment, has taken larger office space at Charles Street in Leicester city centre to facilitate the further expansion of...

Work starts on 80-home development in Rushden

Davidsons Homes has started work on a development of 80 new homes after purchasing seven acres of land in Rushden. The company has full planning...

Double deal at Leicestershire business park

Specialist Property Consultant and Chartered Surveyor, Wells McFarlane has completed two transactions at Arkwright Hill Farm Business Park, Leicestershire, representing more than 12,000 sq...

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.

Close