Rolls-Royce has reported a loss of £4bn for 2020 as the jet-engine manufacturer’s business was shaken by the coronavirus pandemic.
The FTSE 100 manufacturer revealed it burned through £4.2bn in cash during the year as revenues from servicing passenger aircraft collapsed. It expects to burn through a further £2bn this year.
Rolls-Royce’s revenues were among the most vulnerable to the pandemic because of its reliance on making and then servicing jet engines for passenger aircraft. In the year before the pandemic its civil aerospace business brought in £8bn in revenues, compared with £5bn in 2020.
The underlying loss before tax of £4bn compared with a profit of £583m the year before. The underlying loss partly reflected charges related to financing foreign exchange as it adjusted to lower than expected dollar earnings.
Losses before tax for 2020 were £2.9bn, including £1.4bn in write-offs and nearly £500m in redundancy costs.
Rolls-Royce scrambled last year to cut costs and raise cash when the extent of the pandemic became clear. That included cutting 7,000 jobs out of 19,000 across its global civil aerospace division, in what it said was the largest restructuring in the venerable company’s recent history.
It has also negotiated two-week shutdowns of its engine factories this summer in an effort to save more cash.
The hours flown by planes with Rolls-Royce engines slumped to only 43% of 2019 levels. In 2021, hours flown are only expected to improve gradually, to 55% of 2019 levels.
Rolls-Royce said it expected earnings to accelerate in the second half of this year, but even during 2022 it expected flying hours to be a fifth lower than 2019 as the slow recovery in international travel continues, in part because of new variants of the virus.
Deliveries of new engines are not expected to recover significantly for a “few years” at least.
Warren East, Rolls-Royce’s chief executive, said the job losses were “regrettable, but unfortunately very necessary”. East added that the company had made a “good start” on raising more money through sales of parts of its business.
East said the company would try to continue investing in lower-carbon technologies. By 2023, Rolls-Royce plans to devote 20% of its research and development budget to small modular reactors, hybrid, hydrogen and electric power technologies, as part of its plans to reduce its carbon footprint, up from 7% now.