Rolls-Royce has revealed its underlying profits are up by almost 150 per cent in the first half of the year, as strong growth in its sales of Trent engines and services work helped the FTSE 100 company to recover from large costs from past bribery settlements.
Underlying revenue rose 6 per cent to £6.87bn in the half year to June 30, while underlying profit before tax rose 148 per cent to £287m – comfortably beating analysts’ estimates for £158m profit.
The best performing sectors were civil aerospace and nuclear, where revenues rose 14 per cent and 8 per cent respectively – the former was boosted by a 27 per cent increase in deliveries of Trent engines. Revenues in its marine division slipped 15 per cent due to weak offshore markets.
The results mark the beginning of a recovery for the engine maker after it reported the biggest headline loss in its history earlier this year, when it absorbed the impact of its £671m settlement with regulators for past bribery and corruption.
The company’s free cash outflow improved 18 per cent to £339m.
On Monday Rolls-Royce was one of the biggest fallers among UK-listed stocks after the company’s executives warned investors not to take its promise to generate £1bn in free cash flow as a firm target.
Shares in the company had surged 40 per cent in the year-to-date, largely due to expectations of a substantial improvement in cash flow over the next three years.
However, the FT reported last weekend the executives remain concerned that the market could be ignoring the significant operational and market challenges the company still faces.
Commenting on Tuesday’s results, Warren East, chief executive, said:
Rolls-Royce delivered encouraging year-on-year operational progress in the first six months of the year. Civil Aerospace large engine deliveries increased 27% and we made good further progress improving Trent XWB OE economics. Restructuring savings were ahead of plan. Together with a higher than expected benefit from long-term contract accounting adjustments, this resulted in a good set of results, with financial performance ahead of our expectations for the first half.
Looking to the balance of the year, execution and delivery of a number of important milestones across our businesses will be key to achieving our full year expectations. Our outlook for full year profit and cash remains unchanged.