By Anthony O. Goriainoff

--Rolls-Royce is reviewing options to strengthen balance sheet, including making GBP2 billion of disposals

--The company posted a first-half pretax loss of GBP5.37 billion and expects 2020 underlying revenue to be down 25% to 30%

--Rolls-Royce said it continues to expect GBP4 billion cash outflow this year

--The engine maker said it will require additional funding if its base-case scenario occurs

Rolls-Royce Holdings PLC said Thursday that it has identified up to 2 billion pounds ($2.64 billion) of potential disposals over the next 18 months as it seeks to shore up its balance sheet, while it continues to bleed cash.

The British aircraft-engine maker--which has been hurt by a collapse in demand for its civil-aerospace business due to the coronavirus pandemic--said it is reviewing a number of options to strengthen its balance sheet that could include a combination of debt, equity as well as money raised from disposals.

Rolls-Royce said it expects cash outflow for the year to be GBP4 billion and that net debt will increase significantly by the end of 2020. It had debt of GBP1.7 billion at June 30.

The company said it has started a number of initiatives to return to positive free cash flow from the second half of next year, with a sustained cash flow from 2022.

Rolls-Royce warned that the timing of recovery of commercial aviation to pre-pandemic levels and the availability of sufficient funding indicated "the existence of material uncertainties that may cast significant doubt about the group's ability to continue as a going concern."

The company said its GBP1.9 billion revolving credit facility is due to expire in October 2021, and that its base-case scenario calls for additional funding of a similar amount to maintain sufficient liquidity from then on.

Rolls-Royce said that in the event of a second wave of the coronavirus pandemic, and its plausible downside scenario is reflected, the company would require additional funding over and above the revolving credit facility through a combination of debt, equity and the proceeds from the business disposals.

The company said it has identified a number of potential disposals, including Spanish engine and turbine maker ITP Aero, as well as a number of other assets. As part of its restructuring plan, Rolls-Royce said more than 4,000 people in its civil aerospace division had left the business and that it expects at least a further 5,000 across the company to leave by the end of the year. This includes more than 2,500 voluntary-severance and early-retirement agreements in the U.K., it said.

The company posted a pretax loss of GBP5.37 billion for the first half of the year, compared with a loss of GBP791 million for the same period of 2019.

Rolls-Royce said this was partly due to a GBP2.6 billion non-cash loss stemming from the revaluation of its foreign-exchange hedge book.

Revenue was GBP5.82 billion compared with GBP7.88 billion for the year-prior period. Rolls-Royce said that it expects full-year revenue to be 25%-30% below last year's level of GBP15.45 billion, and believes revenue will be back to 2019 levels in 2022.

The board hasn't declared an interim dividend in order to preserve cash.

Shares at 0840 GMT were down 24 pence, or 9.5%, at 229.20 pence.

Write to Anthony O. Goriainoff at anthony.orunagoriainoff@dowjones.com