Engine-maker Rolls-Royce has plummeted to a mammoth £4 billion annual loss after 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” from the pandemic on its performance and near-term outlook.
It said it is “encouraged” by the vaccination programme and hopes the aviation sector can recover as the global economy bounces back, but warned that prospects remain “uncertain and highly sensitive to the developments of the Covid-19 virus”.
Despite this, it stood by its forecast for cash outflow – a closely-watched measure for the group – to improve in 2021.
It saw cash outflow of £4.2 billion in 2020, though Rolls forecast this would improve this year to around £2 billion and is set to turn positive at some stage during the second half.
This is set to be supported by an increase in engine flying hours to around 55% of pre-Covid levels in 2021 as the industry starts to rebound, rising to 80% in 2022.
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.”
Shares lifted 3% higher on optimism over the group’s cash flow outlook.
Laura Hoy, equity analyst at Hargreaves Lansdown, said the Rolls-Royce results are “brutal”.
“No amount of cost-saving and restructuring was enough to offset massive declines in civil aerospace, the group’s largest division.”
She added that the civil aerospace arm, which accounts for nearly half of Rolls-Royce’s revenues, is set to be “bogged down by losses well into the future”.