Rolls-Royce expects £4.2bn cash outflow after coronavirus second wave hits flights

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Rolls-Royce Holdings PLC (LON:RR.) said it expects to end 2020 with net debt of £1.5-£2.0bn after a cash outflow of £4.2bn during the year as airline aftermarket sales were crushed by coronavirus (COVID-19) travel restrictions.

The FTSE 100-listed group said in a trading statement on Friday that it will have axed more than 5,500 jobs during the year, ahead of its prior projection of 5,000 as it looks to do away with 9,000 roles by the end of 2022.

Cash outflow reflected the second wave of COVID-19 on flying hours in the fourth quarter, with a large portion of the company’s revenues based on the number of hours flown by airlines using its engines.   

In the 11-month period to the end of November, invoiced engine flying hours (EFH) were down roughly 58% on last year, with the 76% slump in the second quarter improving to 67% in October and November.

While the balance sheet has swung to a net debt position from a £1.4bn net cash figure at the end of last year, the group said actions to preserve cash are expected to deliver more than £1bn of savings in 2020 and after the £5bn package of rights issue and bond sale last month expects to end the year with liquidity of £8.5-£9.0bn.

Chief executive Warren East said the consolidation and reorganisation of the Civil Aerospace business is “well underway”.

He added: “The outlook remains challenging and the pace and timing of the recovery is uncertain. However, our actions have given us a strong foundation to deliver better returns as our end markets improve”.

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