(Alliance News) - Rolls-Royce Holding PLC on Tuesday said new coronavirus strains and the tighter travel restrictions introduced in their wake is creating short-term uncertainty.
Shares in the FTSE 100-listed jet engine maker were down 8.9% in London early Tuesday at 89.28 pence each.
"Continued progress on vaccination programmes is encouraging for the medium-term recovery of air traffic and economic activity. In the near-term, however, more contagious variants of the virus are creating additional uncertainty," Rolls-Royce explained.
Trading in December was broadly in line with expectations across all business units, Rolls-Royce said, and there was "good progress" on its restructuring programme. Full-year free cash outflow was in line with previous guidance, the firm added.
While continued progress on vaccine roll-outs is encouraging for the medium-term recovery of air traffic and economic activity, new virus variants are creating uncertainty in the near-term.
"Enhanced restrictions are delaying the recovery of long-haul travel over the coming months compared to our prior expectations, placing further financial pressure on our customers and the wider aviation industry, all of which are impacting our own cash flows in 2021," Rolls-Royce said.
Its current forecasts indicate free cash outflow in the region of GBP2 billion in 2021. This is based on widebody engine flying hours for this year at around 55% of 2019 levels, compared to a base case of 70% presented in October.
"We continue to expect to turn cash flow positive at some point during the second half, reflecting our forecasted profile of flying hours as they recover from today's low base," the company said.
Rolls-Royce said its year-end liquidity was about GBP9 billion, which sits at the upper end of its guided range, so gives the firm "confidence" it is "well-positioned" for the futures despite the "more challenging near-term market conditions".
It continued: "We remain focused on completing our restructuring programme and footprint consolidation as well as maintaining cost control and capital discipline. During 2020 we removed around 7,000 roles, making good progress towards our target to remove at least 9,000 roles by the end of 2022."
"This restructuring will be a key enabler of our target to deliver at least GBP750 million of free cash flow - excluding disposals - as early as 2022, contingent on the expected recovery in engine flying hours," Rolls-Royce added.
By Paul McGowan; paulmcgowan@alliancenews.com
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