Highlights:
- Significant H1 impact from COVID-19; timing and shape of industry recovery remains uncertain
- Successful execution of cost mitigations; £350m delivered in H1 towards £1bn 2020 target
- Fundamental restructuring of Civil Aerospace; > 4,000 group headcount reduction by 27 August
- Defence remained resilient; Power Systems experienced disruption in some end markets
- Rapid actions taken to strengthen liquidity; £6.1bn at end H1 and £2.0bn loan agreed in H2
- Targeting potential disposals to raise at least £2bn, including ITP Aero and other assets
- Reflecting uncertainties, reviewing a range of options to further strengthen our balance sheet
Warren East, Chief Executive said: “We ended 2019 with good operational and financial momentum. However, the COVID-19 pandemic has significantly affected our 2020 performance, with an unprecedented impact on the civil aviation sector with flights grounded across the world. We have responded rapidly to increase our liquidity, with £6.1bn at the end of H1 and a further £2.0bn term loan agreed in H2, to help weather the continued uncertainty around the timing and shape of the recovery in the civil aviation sector. We have made significant progress with our restructuring, which includes the largest reorganisation of our Civil Aerospace business in our history. This restructuring has caused us to take difficult decisions resulting in an unfortunate but necessary reduction in roles. These actions will significantly reduce our cost base, which combined with recovery in Power Systems and continued resilience in Defence, will help us to deliver significantly improved returns as the world recovers from the pandemic.
While our actions have helped to secure the Group’s immediate future, we recognise the material uncertainties resulting from COVID-19 and the need to rebuild our balance sheet for the longer term. We have identified a number of potential disposals that are expected to generate proceeds of more than £2bn, including ITP Aero and a number of other assets. Furthermore, in light of ongoing uncertainty in the civil aviation sector, we are continuing to assess additional options to strengthen our balance sheet to enable us to emerge from the pandemic well placed to capitalise on the long-term opportunities in all our markets.”
First Half Group financial summary
- Underlying revenue of £5.6bn, down 24%, and reported revenue of £5.8bn, down 26%.
- Underlying operating loss of £(1.7)bn including one-off charges of £(1.2)bn in Civil Aerospace, largely related to COVID-19.
- Reported operating loss of £(1.8)bn included £(1.1)bn impact from impairments and write offs and £(366)m restructuring charges partly offset by a £498m exceptional credit on the Trent 1000 programme, driven by COVID-19.
- US$10.3bn reduction in FX hedge book to US$26.2bn to reflect lower forecast US$ receipts; resulting in a £1.46bn underlying financing charge.
- Reported loss before tax of £(5.4)bn included £(2.6)bn non-cash loss from the revaluation of our FX hedge book; Underlying loss before tax of £(3.2)bn.
- Reported post-tax loss of £(5.4)bn; Underlying post-tax loss of £(3.3)bn.
- Free cash outflow of £(2.8)bn; 47% lower large engine flying hours and significant working capital outflows including £1.1bn negative impact from our choice to cease invoice discounting.
- Liquidity of £6.1bn comprising £4.2bn of cash at 30 June, and £1.9bn undrawn revolving credit facility (RCF). Additional £2.0bn undrawn term loan announced in July and finalised in August.
- Net debt of £(1.7)bn excl. lease liabilities (FY 2019 net cash of £1.4bn).
- Free cash outflow of approximately £(1)bn expected in H2 reflecting an acceleration of cost mitigations, resulting in approximately £(4)bn FY 2020 outflow.