LONDON (Reuters) – British engine-maker Rolls-Royce said it was on track to meet its forecasts for 2021, reassuring investors that despite a muted recovery in long-haul travel across the world its cost-cutting and disposal plans were stabilising the business.
At the height of the pandemic last year, revenues at Rolls’s civil aviation business, its biggest unit, tumbled as airlines stopped flying, resulting in a perilous few months for the company before it raised new cash and secured loans.
For 2021, Rolls-Royce stuck to guidance for free cash outflow to improve to 2 billion pounds, and for cash flow to turn positive in the second half of this year, but it warned that the slow aviation recovery would affect its 2022 target.
The group had said it could reach free cash flow of 750 million pounds as early as 2022, but it said the pace of the travel recovery meant that this was now likely to happen later.
Rolls-Royce has a cost-cutting programme and a 2 billion pound ($2.78 billion) disposal plan to help repair its finances from the drop in flying during the pandemic.
It said it would achieve more than 1 billion pounds of cost savings in 2021, and that the disposals were progressing well.
The company said on Wednesday that it was in exclusive talks with a Bain Capital-led consortium on the potential sale of its Spain-based ITP Aero unit, for a reported 1.6 billion euros.
In Rolls’s civil aviation business, its biggest unit, large engine flying hours came in at 43% of pre-pandemic levels in the first half, only a slight improvement from the 40% recorded in the first few months of the year.
($1 = 0.7200 pounds)
(Reporting by Sarah Young; editing by Guy Faulconbridge and Paul Sandle)
