Shares in engine-making giant Rolls-Royce rose over 14 per cent this morning as the firm unveiled a raft of measures to shore up its finances during the coronavirus crisis.
The blue-chip firm, which supplies engines to aerospace giants Airbus and Boeing, is paid by airlines according to the number of hours flown using its engines.
In March, chairman Warren East said, flying hours halved, leading to a £300m hit to the company’s finances, with further reductions expected in April, as the vast majority of the world’s carriers have grounded most of their planes.
As a result, Rolls-Royce has scrapped its financial targets for the year and cancelled its dividend for the first time since 1987.
East added that the firm would do more to strengthen its financial, including reducing salaries across its worldwide workforce by 10 per cent this year.
In a statement Rolls-Royce said it had secured an additional £1.5bn revolving credit facility, bringing its overall liquidity to £6.7bn, to give it headroom during a potential prolonged downturn.
Jefferies analyst Sandy Morris said that Rolls’s update should give investors confidence in the company’s ability to cope with the downturn.
“There is plenty of liquidity. There are no worrying developments,” he said.
Ian Forrest, investment research analyst at The Share Centre, said: “Investors will be pleased to hear the company is getting on top of the long-running issues with the Trent engine, and also that defence activity has not been affected by Covid-19 as yet.
“However, there were few other positives for investors in this update”.
Roughly half of the firm’s £15bn annual revenue is derived from its aerospace business, with the remainder split between its defence and power divisions.
Rolls-Royce is one of a number of engineering giants currently engaged in an industry wide attempt to manufacture 10,000 ventilators for the NHS.
The company is part of a consortium known as Ventilator Challenge UK along with firms such as BAE Systems, Meggitt, GKN and Smith’s.