LONDON (BLOOMBERG) - Rolls-Royce Holdings suffered a record half-year loss after the coronavirus crisis grounded jetliner fleets, and said it plans to sell assets to build up cash that can help it weather the downturn.
The pre-tax loss of £5.4 billion (S$9.74 billion) was swollen by a charge for curbing currency hedges as sales shrink, Rolls-Royce said on Thursday (Aug 27), together with a writedown of the value of its main jet-engine arm.
The company said it wants to raise at lease £2 billion from disposals within 18 months, identifying Spanish unit ITP Aero, a maker of aircraft and industrial engines and parts, as the asset most likely to be offloaded.
Rolls-Royce is also closing sites and cutting jobs as it grapples with a slump that's expected to depress demand for the wide-body engines in which it specializes for years to come. Chief executive officer Warren East, who had already warned that the airliner-engines business could emerge a third smaller, said 4,000 posts have been eliminated so far out of a potential 9,000 that may need to go.
"We have made significant progress with our restructuring, which includes the largest reorganization of our civil aerospace business in our history," Mr East said in a statement, adding that the "difficult decisions" will significantly reduce the group's cost base.
Rolls-Royce fell as much as 7.7 per cent and traded 6.5 per cent lower as of 8.06am in London, taking the stock's decline this year to 65 per cent and cutting its market value to 4.57 billion pounds.
The CEO said on a call that he doesn't see engine flying hours getting back to 2019 levels even by 2022, and that the timing and shape of the eventual recovery remains very uncertain.
Mr East will have to carry through the transformation without chief financial officer Stephen Daintith, who has been appointed to the same role at grocery-delivery firm Ocado Group. Rolls said he will be staying on to support the transition and that the search for a successor is under way.
Rolls-Royce reported a £2.6 billion non-cash loss from the revaluation of currency hedges. The company is paring back its dollar hedging by £10 billion, or 27 per cent, through 2026 to reflect the likelihood of greatly reduced revenue. Most jetliner sales are priced in the US currency.
The engineering firm also recorded £1.1 billion of impairment charges and write-offs and £400 million of exceptional restructuring charges.
Rolls-Royce reiterated that it expects a cash outlflow of £1 billion in the second half, lower than in the first, reiterating that the full-year figure will be a negative £4 billion.