ROLLS-ROYCE returned to profit in the first half of 2021, but said the pandemic-hit international aviation industry is taking longer than expected to recover.
The engineering giant posted bottom-line profits of £393 million for the first six months of the year in a marked improvement from mammoth losses of £5.4 billion a year ago.
On an underlying basis, it reported pre-tax profits of £133m compared with losses of £3.2bn a year earlier.
Shares lifted three per cent in early trading and closed nearly double that.
Rolls-Royce said international travel will bounce back once border restrictions are lifted, but warned that slower recovery will mean it takes longer to achieve a free-cash flow target of £750m.
It said: “We are confident that, when border restrictions are lifted, the recovery of international travel will accelerate.”
Free-cash flow targets are “still achievable”, but it added that “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. It said large-engine flying hours were still less than half of pre-pandemic levels in 2019, at 43%, but this is up from the 34% seen in the second half of 2020.
The firm said its goal to raise at least £2bn from selling off some parts of the business is “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 its Spanish unit, ITP Aero, is “moving forwards”.
Michael Hewson, chief markets analyst at CMC Markets, said “there is no question that Rolls-Royce continues to face significant challenges”. Rolls-Royce shares closed up 6.14p, or 5.87%, at 110.68p.