Rolls-Royce-turbofan. Photo RR

LONDON – Today Rolls Royce (RR) has published its first half-summary of 2020. Warren East (58), CEO of RR, said, “These are exceptional times. The COVID-19 pandemic has created a historic shock in civil aviation which will take several years to recover.”

“We started this year with positive momentum and strong liquidity and acted swiftly to conserve cash and cut costs to protect Rolls-Royce during the pandemic.”

“We are taking steps to resize our Civil Aerospace business to adapt to lower medium-term demand from customers and help secure our future. This means we have had to take the very difficult decision to lose people who have helped us become the company we are and who have been proud to work for Rolls-Royce. “

“It is my first priority to treat everyone – whether they are leaving or staying – with dignity and respect. We will take the lessons of how we have dealt with this unprecedented challenge with us and position ourselves to emerge as an even stronger company in the future.”

Rolls Royce Trent 1000 Boeing 787. Photo: Kurush Pawar

First half 2020 summary


  • Widebody engine flying hours (EFH) down approximately 50% in H1 and 75% in Q2
  • Good progress on Trent 1000 fixes; achieved single-digit aircraft on ground target
  • Defence remained resilient; low double-digit percent decline in Power Systems revenue
  • Free cash outflow of approximately £3bn, reflects £1.1bn reduction in receipts from EFH and engine deliveries and £1.1bn one-time impact from the cessation of invoice factoring
  • £1.0bn cost mitigation actions for 2020 on track; approximately £300m achieved in H1
  • Expect improved H2 performance with FY free cash outflow of approximately £4bn
  • Restructuring underway supporting free cash flow recovery to at least £750m in 2022
  • $10bn reduction in hedge book to de-risk and re-align to expected mid-term demand
  • Liquidity increased to £8.1bn including new undrawn £2bn 5-year term-loan facility
Rolls Royce Trent 1000 Carbon Fibery Fan Blades. Photo: Rolls Royce

Financial updates


Our cashflows have been significantly affected by COVID-19 and as a result our free cash outflow in the first half was approximately £3 billion. The main impacts in the period included:

  • approximately £1.1 billion less cash inflow due to lower receipts associated primarily with widebody engine flying hours together with lower engine deliveries
  • approximately £1.1 billion one-off adverse impact from the cessation of invoice factoring, an industrywide practice which in the past has been used to align the timing of cash receipts with engine deliveries
  • increased inventory and debtor balances in addition to the typical seasonal working capital outflows, which averaged approximately £200 million outflow per year over the last two years
  • positive impact of approximately £300 million from savings related to the mitigating actions achieved in the first half.
Rolls Royce Trent 1000 on the left sides for Boeing 787 family Rolls Royce Trent 970-972B on the right sides for Airbus A380-841/842. Photo: Airbus

Closing Out Unnecessary Hedges


Due to the deterioration in the medium-term outlook caused by COVID-19, absent mitigating actions, RR forecasts a shortfall of US$ denominated cash receipts over the next seven years compared to our hedged position. 

As a result, it is financially prudent to mitigate the future risks of this hedge book by closing out hedges that are no longer required. We have therefore reduced the hedge book from $37bn to approximately $27bn. 

This will result in cash settlement costs totaling approximately £1.45bn comprising approximately £100m of cash costs in 2020 (incurred in the first half), £300m in each of 2021 and 2022, and £750m spread over 2023 to 2026. The related underlying financing charge will be recognized in our first half 2020 underlying income statement.

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