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Summary
- Aerospace engine maker Rolls Royce’s shares spiked over 3 per cent in early trading today on good H1 2021 results
- The company return to profits of £147 million after posting a loss in the same period the previous year.
Aerospace and defence engine manufacturer Rolls Royce Holdings PLC (LON: RR.) returned to profit in H1 2021 results, a sharp reversal from posting a loss in H1 2020 after undertaking several cost cutting measures.
The development was well reciprocated by the markets and Rolls Royce’s shares surged over 3 per cent at the start of the trading session.
Rolls Royce’s (LON: RR) share price performance
Rolls Royce’s shares were trading at GBX 107.94, up by 3.25 per cent on 5 August at 08:03 AM GMT+1. Comparatively, the FTSE 100 index, which it is a part of, was trading at 7,105.34, down by 0.26 per cent.
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Rolls Royce’s market cap stood at £8.747 billion as of 5 August and its one-year return was at 28.35 per cent.
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Rolls Royce’s H1 2021 results
The engine maker reported H1 2021 underlying profit of £147 million, compared to an underlying loss of £3,326 million in H1 2020. The reversal was driven by a focus on financial priorities and profits from its continuing operations. The group’s defence business segment contributed the most to the company’s underlying profit, followed by power systems, civil aerospace and other business segments.
The company also reported an improved free cash flow position, as its group free cash flow (FCF) stood at a negative £1,151 million in H1 2021, compared to a negative group FCF of £2,801 million in H1 2020. The company aims to have a positive FCF by H2 2021.
The company’s divestment programme of selling off parts of the business to raise up to £2 billion was progressing well.
Just a day prior to the result announcement, on 4 August, it had signed an agreement to sell liquid fuel and gas engine business Bergen Engines to engineering group Langley Holdings for up to EUR 63 million.
The group also said its restructuring plans were showing results, and the company expects to have over £1 billion in savings in FY 2021. Rolls Royce has already made 8,000 jobs redundant worldwide, out of its goal of removing up to 9,000 jobs and have a saving of £1.3 billion by the end of 2022.
The company though expects the international travel sector’s recovery to take place later than the initial forecast of 2022.
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