Rolls-Royce Holdings PLC (LSE:RR.) returned to profit at the half-year and confirmed it is near to a sale of its ITP Aero division.
Bain Capital in combination with Spanish engineer Sener is in exclusive talks to buy ITP Aero for about £1.4bn, Rolls said last night after reports in the Spanish media.
The sale is part of a £2bn disposal programme (the sale of Bergen Engines was announced yesterday) that is a key plank of Rolls-Royce’s attempts to rebalance its finances after the slump in travel flights due to the Covid pandemic.
The engineer announced better news on that score today as it moved back into the black and said it is confident of hitting a target to be generating cash again by the end of the year.
Revenues in the six months to end-June 2021 still dropped slightly to £5.16bn (£5.67bn), but cost savings meant an underlying operating profit of £307mln against a £1.63bn loss a year ago while pre-tax profits turned round to £114mln against a £5.2bn deficit.
Rolls-Royce has now axed 8,000 civil aerospace jobs out of a target of 9,000 as part of the restructuring, which has cut its cost base by a third, and chief executive Warren East said the benefits were visible in reduced cash outflow and improved operational efficiency.
“This leaner cost base together with a strong liquidity position gives us confidence in our ability to withstand uncertainties around the pace of recovery in international travel and benefit from the eventual rebound.”
Engine flying hours had also improved on average to around 43% of 2019 levels against 39% six months ago.
Elsewhere, the defence arm is doing well, said East, while power systems is stable.
The first half saw a cash outflow of £1.2bn but with a return to cash generation, the full-year outflow is expected to be £2bn compared to £4.2bn in 2020.
East said free cash inflow of £750mln a year is achievable on flying hours at 80% of 2019’s level, though this now looks likely to be delayed beyond 2022 due to a slower-than-expected recovery in long-haul traffic.