Cost cuts and asset sales keep Rolls-Royce on track despite low travel

LONDON, Aug. 5 (Reuters) – Rolls-Royce (RR.L) is on track to meet its guidance for this year as cost cuts and asset sales help UK engine manufacturer weather slow recovery in travel long-haul, he said. Thursday.

At the height of the pandemic last year, revenues for Rolls’ largest company, its civil aviation unit, plummeted when airlines stopped flying, resulting in a perilous few months before the company no longer collects cash and guarantees loans.

Raising £ 2bn ($ 2.8bn) through asset sales is key to rebuilding finances, and Rolls said on Wednesday it was in exclusive talks with a buyer for its ITP Aero unit, for a amount of 1.6 billion euros ($ 1.9 billion). Read more

Rolls is also counting on a cost reduction program in its civil aviation business to help it as international flights continue at low levels due to the pandemic, and has said it is on track to achieve more. a billion pounds in savings this year.

For January-June, Rolls posted underlying operating profit of 307 million pounds, up sharply from the loss of $ 1.63 billion recorded last year, and the group’s shares rose. traded 2.2% more at 107 pence in first trades.

Managing Director Warren East ignored concerns about the slower-than-expected recovery in international travel, which the company said would mean it would hit a 2022 free cash flow target of £ 750million later than expected .

“We are focusing on what we can control,” he told reporters.

“We have plenty of cash to handle the uncertain pace of the recovery in international travel.”

For 2021, Rolls stuck to its forecast for free cash outflow to improve to £ 2 billion and cash flow to turn positive in the second half of this year, despite the slower recovery in working hours. flight.

Rolls, whose engines power planes like the Airbus A350s and Boeing 787s, said large engine flight hours were 43% of pre-pandemic levels in the first half of the year. He hopes they will be at 55% by 2021 overall.

During the first half of the year, the group was supported by its defense arm, which manufactures engines for military jets and powers UK nuclear submarines, as well as a takeover of its power systems unit, which manufactures engines for boats, trains and other vehicles.

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Reporting by Sarah Young Editing by Paul Sandle and Mark Potter

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