Rolls-Royce has announced it is taking additional measures to protect its people and business during the financial disruption on financial and operational performance caused by COVID-19, the company said.
To help keep people safe and minimise operational disruption, the company has implemented a number of proactive measures, which are aligned with local and national guidelines. This includes introducing remote working practices alongside workplace measures such as social distancing, enhanced hygiene procedures, modified shift systems in manufacturing facilities and, where necessary, has temporarily closed certain facilities to all but essential personnel in order to sustain modified operations over a longer period.
Rolls-Royce took the precautionary decision in March to draw fully on its GBP 2.5 billion revolving credit facility. Including this cash, which has been placed on short-term deposit, current gross cash balance is GBP 5.2 billion. The company has secured an additional GBP 1.5 billion revolving credit facility commitment with a consortium of banks, which will increase overall liquidity to GBP 6.7 billion.
Rolls-Royce is executing a number of specific mitigations to reduce cash expenditure, which will have a cash flow benefit of at least USD 750 million in 2020 in addition to ongoing transformation plans. These mitigations include minimising discretionary costs such as non-critical capital expenditure projects, consulting, professional fees and sub-contractor costs, ceasing all non-essential travel, postponing external recruitment, and reducing salary costs across the global workforce by at least 10% in 2020, subject to local legal requirements.
Salaries for senior managers and Executive Team will be reduced by 20% for the rest of 2020, comprising a reduction of 10% and a deferral of 10%, with an additional bonus deferral for the CFO and CEO. There will also be a corresponding reduction in fees for Non-Executive Directors of the Board for the remainder of the year.
The Board has decided that in light of the uncertain macro outlook they are no longer recommending a final shareholder payment of 7.1 pence per share in respect of 2019, equivalent to a further £137 million.