Rolls-Royce sticks to guidance, warns outlook still challenging

LONDON: British engineering company Rolls-Royce stuck to its guidance to turn cash flow positive during the second-half of next year, despite warning that the outlook remains challenging and the pace of the recovery is uncertain.

The company, whose engines power Boeing 787s and Airbus A350s, has been hit by the travel slump during the pandemic and in November raised 2 billion pounds (US$2.7 billion) from shareholders and took on 3 billion pounds of debt to help it survive COVID-19.

In a trading update on Friday, it warned that the pace of recovery for engine flying hours, a key measure of how much it is paid by airlines, had slowed due to a second wave of infections in some geographies.

"The outlook remains challenging and the pace and timing of the recovery is uncertain," said chief executive Warren East in a statement.

Over the 11 months to November engine flying hours were approximately 42per cent of their prior year level. In October and November they came in at about 33per cent compared to last year, improving on the 29per cent seen in the three months ended September.

To ride out the pandemic, the company plans to sell assets worth 2 billion pounds to pay down debt and is cutting 1.3 billion pounds in costs, a plan it said is on track.

That includes axing 9,000 jobs and closing factories to adjust to lower demand from airlines that fly its engines. Rolls said that more than 5,500 roles would have been removed by the end of 2020.

(Reporting by Sarah Young, Editing by Paul Sandle and James Davey)