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Rolls-Royce 8-month Revenue Materially Below Last Year; To Raise About GBP 2 Bln

Rolls-Royce Holdings plc (RYCEF.PK,RR.L,RYCEY.PK) said in its trading update, that revenue and underlying operating profit for the first eight months of the year were materially below the prior year, significantly affected by the COVID-19 pandemic and related one-off charges taken in the first half of 2020.

The company noted that Civil Aerospace and ITP Aero businesses continued to see the largest impact from COVID-19; performance in its Defence business remained resilient; and Power Systems business experienced disruption in some end markets.

The Group said it continued to experience free cash outflows in July and August, though at a reduced level compared to the first half of 2020 and modestly better than its expectations.

The company continues to expect a free cash outflow of about 4 billion pounds in the full year ending 31 December 2020, although uncertainties remain around the timing and shape of the recovery in large engine flying hours and the timing of large engine deliveries.

Meanwhile, Rolls-Royce said that it plans to raise gross proceeds of about 2 billion pounds through a fully underwritten 10 for 3 rights issue to strengthen balance sheet and support long-term strategy.

In conjunction with the Rights Issue, the company plans to commence, in the near future, a bond Offering to raise gross proceeds of at least 1 billion pounds.

The company has also agreed commitments for a new two year term loan facility of 1 billion pounds. It received an indication of support in principle from UK Export Finance for an extension of its 80% guarantee to support a potential increase of the company's existing 2 billion pounds five year term loan of up to 1 billion pounds.

In May, Rolls-Royce announced a major restructuring to adjust to the new level of anticipated demand from customers in Civil Aerospace as a result of the impact of the COVID-19 pandemic.

The restructuring is expected to deliver a total annual pre-tax cash saving of at least 1.3 billion pounds by the end of 2022. It expects the restructuring programme to result in a proposed reduction in headcount of at least 9,000 roles.

The company has continued to make further good progress on the plan, with about 4,800 people having left the business by the end of August, with at least 5,000 expected by the year-end.

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