Rolls-Royce is expected to unveil the largest cash outflow in its history this week as bosses lay bare the catastrophic impact of the Covid crisis in annual results.
The engineer is expected to reveal on Thursday that it burned through £4.2bn in 2020, as well as plunging to an underlying pre-tax loss of £3.1bn on revenues of £11bn – down £4.5bn on last year.
Rolls has been hammered by a collapse in air travel caused by coronavirus, as aircraft powered by its jet engines were grounded because of a lack of demand.
In normal times Rolls relies on its civil aerospace business for half its annual revenue, much of this coming from “power by the hour” contracts where the company is only paid for hours when airliners are in flight.
At the company’s trading update in December, Rolls said that “invoiced engine flying hours” for its large engines which power wide-body airliners were down 42pc.
Rolls is being hit particularly hard by the pandemic as its civil aerospace business is almost entirely focused on engines for the wide-body airliners most often used for intercontinental flights. This part of the air travel market has been hardest hit by coronavirus and is expected to be slowest to recover, not returning to pre-pandemic levels until 2025.
Warren East, the firm’s boss, last year launched brutal cost cuts and a massive restructuring drive to deal with the fallout from the virus. He plans to axe 15pc of Rolls’ global workforce by 2022, equal to about 9,000 staff, with around 7,000 staff laid off so far.
The company is also selling off chunks of its portfolio in a bid to raise £2bn. Rolls’s Spain-based engine components arm, ITP, is up for auction, with a financial buyer understood to be the most likely to take it on in a deal thought to be worth £1.5bn.
The company has also agreed sales totalling more than £200m for its Bergen marine engine and nuclear controls units.
To further bolster its finances, Rolls-Royce also tapped shareholders for £2bn in a rights issue, unlocking a rescue package totalling £5bn and which included bond sales and a Government-backed loan underwritten by UK Export Finance.