Rolls-Royce returns to profit, but cautions over international travel recovery

The group, which employs several hundred people at the Advanced Manufacturing Park in Rotherham, posted bottom line profits of £393m for the first six months of the year in a marked improvement from mammoth losses of £5.4bn a year ago, boosted by swingeing cost-cutting.

On an underlying basis, it reported pre-tax profits of £133m compared with losses of £3.2bn a year earlier.

It said international travel would bounce back once border restrictions are lifted, but warned the recovery would take longer than first forecast.

The firm said: “We are confident that when border restrictions are lifted the recovery of international travel will accelerate.

“However, based on current industry forecasts for the pace of recovery in international travel, this is likely to occur beyond the initial expected timeframe of 2022.”

The engineering group’s civil aerospace arm – its largest division – has suffered as the coronavirus crisis hammered the global aviation industry.

Chief executive, Warren East, has sought to take swift action to cut costs and raise extra capital to strengthen its battered balance sheet, with aims to save a total of £1.3bn by the end of 2022.

This includes cutting at least 9,000 jobs worldwide – two-thirds of which will impact the UK – and Rolls confirmed around 8,000 have already gone under the programme.

The firm said that its goal to raise at least £2bn from selling off some parts of the business is also “progressing well”, having announced a deal on Wednesday to offload Norwegian maritime engine maker Bergen to British group Langley Holdings.

It added that the sale of ITP Aero is “moving forwards” and that it expects to complete the sale of the civil nuclear instrumentation and control business later in 2021.

Mr East said: “Our continued focus on the elements within our control, together with a good performance from defence and order intake recovery in power systems have enabled us to deliver solid progress in the first half.

“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.”