Rolls-Royce has reported a record half-year loss of £5.4bn after it was “severely impacted” by the coronavirus pandemic – prompting a shake-up that has already cost thousands of jobs.
The engine maker’s finances have been battered by a collapse in demand for flights, resulting in a hit to revenues as well as huge write-off and restructuring charges as it sets course for a turbulent future.
Rolls said that large engine deliveries were down by 50% in the first six months of the year.
The grounding of passenger jets also meant flying hours were halved – hurting the company’s revenues as airlines pay it based on how much they use the engines.
“The global COVID-19 pandemic severely impacted our H1 performance and medium-term forecasts,” Rolls-Royce said.
Shares were down 8% in morning trading.
The company said in May that it planned to cut 9,000 jobs – nearly a fifth of its global workforce – due to the pandemic, and said in its results announcement that 4,000 have gone so far.
Around 6,000 are ultimately expected to go in the UK and the company has already said 1,500 will be affected at sites in Derby and Nottinghamshire, plus 350 at Barnoldswick in Lancashire.
Rolls said demand for large engines is set to remain below 2019 levels until 2025 and warned of “material uncertainties” caused by the pandemic that could cast doubts over its future.
The Derby-based group’s half-year loss of £5.4bn for the first six months of 2020 compares with losses of £791m a year earlier.
It now plans to sell Spanish unit ITP Aero and other assets to raise at least £2bn.
Chief executive Warren East said: “The Covid-19 pandemic has significantly affected our 2020 performance, with an unprecedented impact on the civil aviation sector with flights grounded across the world.
“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.”
Mr East also pointed to further action to offset the hit from Covid-19.
“In light of ongoing uncertainty in the civil aviation sector, we are continuing to assess additional options to strengthen our balance sheet to enable us to emerge from the pandemic well placed to capitalise on the long-term opportunities in all our markets,” he said.
Rolls-Royce reported its biggest-ever full-year loss of £4.6bn three years ago after it booked a huge accounting charge for 2016 linked to currency fluctuations.
A similar accounting charge, worth £2.6bn, formed part of the latest grim financial results.