Engineering giant Rolls-Royce, whose Power Systems business unit features MTU-branded diesel engines used in a wide variety of construction, mining and quarrying machinery, reported a pre-tax loss of £5.3bn for H1 2020.
The company has been largely hit by £1.1bn write-offs and impairments, a £2.6bn loss on FX hedging contracts and restructuring costs of £366mn. Underlying free cash flow, a key metric for Rolls Royce, also came at negative £2.6bn from negative £429mn the same period last year.
Commenting on Rolls-Royce’s first half of 2020 results, Max Hayes, an analyst at Edison Group, said: “The company has experienced a reduction of over 17% of its workforce, equivalent to more than 9,000 roles across the Group worldwide, including approximately 8,000 in its Civil Aerospace business which we are reducing by about a third to adapt to the new level of market demand it is expecting – highlights difficult times as of late.
“Today’s results, greatly influenced by the ongoing pandemic travel restrictions, will mark a turning point for the company in terms of the future direction of the company, with the announced departure of the CFO, as well as future options to increase its balance sheet resilience.”
Hayes said that the only bright spot for investors is Rolls-Royce’s recovery in FCF – expected improved H2 performance with FY free cash outflow of approximately £4bn and restructuring underway supporting free cash flow recovery to at least £750mn in 2022.
He added: “Going forward, investors will be concerned at the future of the company as they face not only negative results but also plummeting share value to their lowest level in a decade. They will also be keeping a close eye on the intended sale of the company’s disposable assets for an expected £2bn, including its Spanish engine business ITP Aero.”
