Rolls Royce is looking for partners to help it develop new technologies after posting eye-watering losses of £5.4 billion in the first half of 2020.
The Covid-19 crisis has hit the engineering stalwart particularly hard, with grounded flights decimating its civil aviation revenues. CFO Stephen Daintith told shareholders on an earnings call today that every 1% drop in the 2019 baseline number of large-engine flights around the world cost the company £30 million.
Its balance sheet liabilities now exceed its assets by £8 billion pounds — “by far” the largest of any European company, according to Bloomberg.
Rolls Royce is looking to innovate its way out of trouble, including by reducing costs across its business, and developing new technologies such as UltraFan, a novel type of jet engine which offers greater fuel efficiency, reduced CO2 emissions and noise.
Daintith, who announced that he is leaving Rolls Royce to take up the CFO role at Ocado, said: “As we look forward and contemplate new products, things like Ultrafan and beyond, have a greater range of new technologies within them and developing those technologies to make them ready to put into engines is a lengthy and risky exercise.
“We’ll be continuing to look at new partnerships, particularly around the development end of new technologies to share some of the risk and accelerate some of the technology developments so that we can get the benefits of them sooner.
“That’s the direction of travel we’re heading in.”
Best known for its engines, Rolls Royce is also working on a range of power solutions for its private and public sector clients, including microgrid technology.
The Rolls Royce earnings report shows revenues fell 24% in the first half of 2020, to £5.5 billion. It also had net debt of £1.7 billion at the end of June, compared to the positive bank balance of £1.4 billion it reported at the end of 2019. However, the company does have £6.1 billion liquidity in the form of cash and loans.
In may Rolls Royce announced it was cutting 9,000 of its 52,000 workforce in a bid to save £1 billion. Today the company also announced it was seeking to raise a further £2 billion by selling parts of its business including the Spanish turbine maker ATP Aero. Further disposals look likely to follow.
The company’s executives saw a few silver linings: “We have a resilient Defence business currently engaged in a number of new contract opportunities, which, if successful, will drive significant future long-term growth.
“Power Systems is well-positioned to benefit from the recovery and from continued demand for mission critical power. In H1 2020 we continued to pursue geographic opportunities and disciplined investment in expanding our product portfolio of sustainable technologies, whilst working actively to deliver cost efficiencies from our manufacturing cost base and footprint.”
The company’s share price, meanwhile, is one third of what it was this time last year,