Rolls-Royce reports a five-fold increase in its H1 underlying operating profit

Rolls-Royce Holdings plc (LON: RR) ended nearly 5.0% up on Thursday after reporting a more than five-fold year-on-year increase in its H1 underlying operating profit.

Rolls-Royce saw a massive improvement in margins

That metric, as per the press release, printed at £673 million ($856 million) versus the year-ago £125 million only.

Rolls-Royce attributed much of the strength in the first six months of the year to its civil aerospace business. Continued recovery in that segment saw margins shoot up to 12.4% in H1 – a 900 basis points increase.

Its transformation programme also fuelled a 38% annualised growth in revenue to £3.3 billion in the civil aerospace division. According to CEO Tufan Erginbilgic:

Our multi-year transformation programme has started well. There’s much more to do to deliver better performance and transform Rolls-Royce into a high performing, competitive, growing business.

Rolls-Royce also noted a 36% increase in large-engine flying hours in civil aerospace to 6.2 million (83% of pre-pandemic level) in H1 as China pulled out of travel restrictions.

Rolls-Royce reiterated its future guidance on Thursday

Rolls-Royce did agree that its power-systems business did not replicate a similar boost to margins but expressed confidence that they’ll improve in the back half of the year.

Large engine orders in H1 jumped from 96 to a whopping 240, as per the press release. On June 30^th, the multinational had its order book at 1,405 engines versus 1,282 at the start of 2023. The British firm saw its order book grow for the first time in H1 since 2018.

Group revenue printed at £7.52 billion – up 34% year-on-year and well ahead of the £6.05 billion consensus. CEO Erginbilgic added:

We have a strong portfolio of products/tech in growing end markets and have secured key contracts that’ll create future value and profitable growth. Our transformation will allow us to play a stronger role in energy transition.

Rolls-Royce reiterated its guidance for up to £1.4 billion of underlying operating profit – also better than expected. It expects 400 to 500 engine deliveries this year and sees large-engine flying hours between 80% and 90% of 2019 levels in H2.