Take off for a £4bn recovery at Rolls-Royce

EMBATTLED RollsRoyce has posted a £4bn turnaround in signs chief executive Warren East’s plan is starting to work.

The strengthening pound helped the Derby-based engineering giant flip from a £2.1bn loss during the first half of last year to a £1.9bn profit this time around.

But even discounting the currency swing, the business beat expectations with half- year profit up 149pc to £287m, driven by delivering more aircraft engines and higher maintenance revenue.

Cash-flow, key to the company’s plans to increase production of its aircraft engines, was also better than expected albeit at negative £339m.

Jefferies analysts said: ‘We believe the results show that after a period of significant upheaval, Rolls- Royce has established its course and we admit to a moment of exuberance about that.’

Since taking over in 2015, East has slashed jobs and other costs as well as the time it takes to produce engines for international clients including Airbus, Boeing and Emirates. He is also adding new engines while trying to save Rolls-Royce around £200m a year following a string of profit warnings in 2015.

An even worse 2016 saw profits fall in every division, while the company was fined a record £671m for historic bribery and corruption, and posted a record annual £4bn loss, mostly based on the fall in the pound on its hedging programme.

But the outlook for 2017 looks better based on yesterday’s half-year results. Rolls- Royce’s civil aerospace division delivered 27pc more Trent engines and profits rose by £125m to £173m.

The company is doubling production of large civil aircraft engines, led by the Trent XWB for the long-range Airbus A350. The engineer aims to capture half of the market by 2020.

Profits grew from £128m to £148m in defence aerospace, mainly due to lower overheads.

Meanwhile, profits in its power systems division rose from £13m to £66m. East, 55, said the business was making good progress but needed to keep its eye on the ball to manage problems with engines in service and the continued ramp-up of production as it meets a £73bn order book. He revealed about 400-500 Trent 1000 engines had problems, with some parts not lasting as long as expected.

But he said problems had been addressed for the new Trent 1000 Ten due to come into service later this year.

‘ Sometimes in trying to achieve better performance we bump into one of those boundaries and that is what’s happening with the Trent 1000 at the moment,’ he said.