(Alliance News) - The head of jet engine maker Rolls-Royce on Wednesday gave a stark reminder of the post-lockdown future faced by companies large and small around the world, as it announced plans to cut 17% of its workforce.
Rolls-Royce proposed the major restructuring in light of the "unprecedented" impact of Covid-19 on its business and the whole of aviation industry.
"Governments across the world are doing what they can to assist businesses in the short-term, but we must respond to market conditions for the medium-term until the world of aviation is flying again at scale, and governments cannot replace sustainable customer demand that is simply not there," said Chief Executive Warren East.
The aerospace firm expects to cut at least 9,000 roles from its workforce of 52,000. In addition to the savings generated from its headcount reduction, it will cut spending across plant and property, capital and other "indirect" cost areas.
The proposed reorganisation is expected to generate annualised savings of more than GBP1.3 billion, of which headcount is expected to contribute around GBP700 million. Cash restructuring costs are likely to be around GBP800 million, with outflows incurred across 2020 to 2022.
The reorganisation will predominantly affect the Civil Aerospace business, where Rolls-Royce will carry out a "detailed review" of its facility footprint.
Rolls-Royce shares opened down 1.7%.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: down 0.5% at 5,969.59
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Hang Seng: down 0.1% at 24,362.86
Nikkei 225: closed up 0.8% at 20,595.15
DJIA: closed down 390.51 points, 1.6%, at 24,206.86
S&P 500: closed down 1.1% at 2,922.94
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GBP: flat at USD1.2243 (USD1.2245)
EUR: firm at USD1.0945 (USD1.0930)
Gold: up at USD1,749.59 per ounce (USD1,740.26)
Oil (Brent): firm at USD34.68 a barrel (USD34.56)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Wednesday's Key Economic Events still to come
0930 BST UK house price index
1000 CEST EU Euro area balance of payments
1100 CEST EU harmonised CPI
1600 CEST EU flash consumer confidence indicator
0700 EDT US MBA weekly mortgage applications survey
1000 EDT US advance quarterly services
1030 EDT US EIA weekly petroleum status report
1400 EDT US Federal Open Market Committee meeting minutes published
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UK consumer prices fell on a monthly basis in April and the annual inflation rate softened considerably, data from the Office for National Statistics showed. Month-on-month, prices fell 0.2% in April after a flat reading the month before. Annually, the inflation rate was 0.8%, notably slower than the 1.5% recorded for March and the 1.7% recorded in February. Year-on-year, liquid fuels prices slumped 42% and gas prices were down 12% amid a collapse in international oil prices, bringing the broader electricity, gas & other fuels category 6.8% lower as a whole. Clothing prices fell 3.1% while food prices were up 1.3%. "While the coronavirus limited the availability of some goods and services, its effect on prices was more muted. Falling petrol and diesel prices, combined with changes to the domestic energy price cap were the main reasons for lower inflation in April," said Jonathan Athow at the ONS.
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London Mayor Sadiq Khan has written to supermarkets and shops urging them to stock face coverings for commuters using the capital's public transport. Khan is asking stores to help Londoners access reusable non-medical face coverings to prevent the spread of coronavirus in enclosed spaces as the lockdown restrictions are eased. Following the government guidance being updated to advise people to wear face coverings in enclosed places where it is difficult to maintain social distancing, Khan said he wants everyone using London's public transport to use them for the whole of their journey, as well as when shopping.
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The EU Commission will present its plans for more environmentally friendly agricultural production and greater biodiversity on Wednesday as part of its "European Green Deal" policy. The aim is to reduce the use of pesticides and antibiotics and improve fertilizers, according to a draft seen by dpa. Animal welfare is also to be improved and fisheries to are be made more sustainable. At the same time, the draft calls for the amount of discarded food and packaging waste to be reduced. The second strategy is to ensure biodiversity. The central point of the biodiversity plan is the expansion of protected areas: 30% of European land and sea area are to be placed under protection and 10% are to be left virtually untouched under particularly strict conditions, according the draft.
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The US economy is predicted to contract 11% in the second quarter of this year, the equivalent of a 38% decline at an annual rate, according to an interim estimate from the Congressional Budget Office. An economic recovery is expected to begin during the second half of this year as economic shutdowns are eased and concerns over the pandemic diminish, the non-partisan agency of Congress said. On the employment front, the CBO said the country would shed 26 million jobs, compared to the fourth quarter of last year. This would be the "steepest deterioration since the 1930s." The jobs recovery would be slow and unemployment would still be stuck at 8.6% by the fourth quarter of 2021.
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BROKER RATING CHANGES
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DEUTSCHE BANK RAISES BT GROUP TO 'HOLD' ('SELL') - TARGET 125 (110) PENCE
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GOLDMAN SACHS REINITIATES JUST EAT TAKEAWAY.COM WITH 'BUY' - PRICE TARGET 11500 PENCE
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CITIGROUP CUTS 3I GROUP TO 'NEUTRAL' ('BUY')
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COMPANIES - FTSE 100
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Credit checking firm Experian reported a "strong" year as it delivered organic revenue growth at the top end of its guidance range, though profit did fall. Revenue for the year to March 31 grew 7% to USD5.18 billion, with organic growth of 8%. Pretax profit fell 2%, however, to USD942 million. "The Covid-19 crisis began to escalate late into our financial year with limited financial impact in FY20. We took swift action across our business in response to the unfolding crisis. We have operations in 45 countries and numerous industry segments, including in many of the societies hardest hit by the pandemic," said CEO Brian Cassin. "We are confident that, once the crisis abates, we will be well placed to continue to deliver on our growth agenda," said Cassin. "Accordingly, we have held our second interim dividend level at 32.5 cents per share."
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COMPANIES - FTSE 250
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Marks & Spencer reported a fall in profit for its recently ended financial year as it took costs and stock write-downs due to Covid-19. Revenue for the year to March 28 was down 1.9% to GBP10.18 billion and pretax profit slumped 20% to GBP67.2 million. The pretax profit figure included adjusting items of GBP335.9 million, with GBP212.8 million of this for costs and stock write-downs due to Covid-19. Food like-for-like sales were up 1.9% while clothing sales fell 6.2% - the latter including an estimated 2.2% hit from Covid-19 in March. CEO Steve Rowe said the results reflect a year of "substantial progress" with some "green shoots" in its clothing arm in the second half. "However, they now seem like ancient history as the trauma of the Covid crisis has galvanised our colleagues to secure the future of the business." The Covid-19 crisis started to impact the business in the first week of March with reductions in Clothing & Home sales across all its markets. While Food sales were resilient, "we did not experience the stockpiling performance of the supermarkets", M&S noted. M&S in a 'Covid-19 scenario' is assuming a 70% decline in UK Clothing & Home revenue for the four months to July and only a gradual return to original budgeted levels by February 2021, which will hit annual revenue by GBP1.5 billion. In UK Food, it expects a 20% decline in revenue in the period to July with sales "level" thereafter. However, it added: "We are pleased to note that in the first 6 weeks of the new year, sales and cash have substantially outperformed the scenario," M&S said. M&S decided against paying a final dividend, and does not anticipate making any payout in its 2021 financial year.
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Wednesday's Shareholder Meetings
Tyman
Vivo Energy
Medica Group
Pharos Energy
Cello Health
Path Investments
Capital & Regional
Judges Scientific
Access Intelligence
Antofagasta
French Connnection Group
Coats Group
Vistry Group
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By Tom Waite; thomaslwaite@alliancenews.com
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