Rolls-royce Falls To £4bn Annual Loss Due To Covid-19

Engineering giant Rolls-Royce (RR.L) has posted a mammoth £4bn ($5.6bn) loss for 2020 after the COVID-19 pandemic devastated its aviation business.

Rolls-Royce, which makes and services engines for airplanes, said it made an underlying loss of £3.95bn last year as revenue dropped by almost a third to £11.7bn. The company recorded a loss of £3.1bn on a reported basis and made an operating loss of £2.1bn.

Chief executive Warren East said 2020 was “an unprecedented year” and thus the impact of COVID-19 was “felt most acutely by our Civil Aerospace business.” The grounding of planes around the world led to plummeting demand for both new engines and the servicing of existing ones, which is where Rolls-Royce makes most of its money.

Rolls-Royce’s civil aviation arm lost £2.5bn last year, which offset small profits at its power systems and defense businesses. Last May, Rolls-Royce announced plans to cut 9,000 jobs as a neighbourhood of a painful restructuring to stem losses. East said on Thursday the choices were “regrettable, but unfortunately very necessary.”

More than £4bn left the business last year. Rolls-Royce said it had been targeting free income generation by the center of this year.
Jack Winchester, an analyst at Third Bridge, said the cash outflow “really does bring into focus the deep pain caused by the pandemic.”

“This may be a business which has been producing positive cash flows within the many millions basically since the turn of the millennium,” he said. “With a painfully large cash burn rate, all eyes are going to be on the fledgling aviation recovery people hope for.”
Despite the massive annual loss, revenue was slightly before City forecasts, and analysts were buoyed by the forecast of a return to free income. Shares rose over 3% to top the FTSE 100 (^FTSE).

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