Sunday 18 March 2018

Rolls-Royce shares soar as aircraft profits beat predictions

Work being carried out on one of Rolls-Royce's Trent XWB airplane engines
Work being carried out on one of Rolls-Royce's Trent XWB airplane engines

Paul Sandle

Rolls-Royce has beaten first-half profit forecasts by delivering 27pc more aircraft engines and higher maintenance revenue.

The British maker of engines for aircraft and ships reported an underlying pre-tax profit of £287m (€321m), up 148pc from a year earlier and beating market forecasts of £193m.

Rolls' shares rose by as much as 8pc to a two-year high of 957.5 pence after its earnings report.

CEO Warren East is rebuilding Rolls-Royce after a record annual loss last year, hurt by a bribery fine, weaker sterling and falling revenue from older engine programmes.

He is cutting costs, shortening manufacturing times and investing in new engines that will increase the size of its fleet and associated servicing revenue in the next decade.

East said the company had beaten expectations in profit and cash in the first half. "That was due to a good performance from civil aerospace, there was an increase there in revenue, particularly from our in-service fleet," he said. "We've made good progress but there's still a lot to do and I'm telling people this is no time for complacency."

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

It said it had an order book of more 2,700 large civil aircraft engines, which reflects an average five years of production including six years of cover for the Trent XWB family.

The profit, however, comes from long-term service contracts with airlines.

East said the company had reduced the loss it is making producing the engine as early launch pricing came to an end and it improved manufacturing efficiency.

Analysts at Jefferies said a better-than-expected cash performance of negative £339m against their expectation of negative £585m was reason enough for "a moment of exuberance".

East, however, said the company needed to continue to ramp up of civil engine production and new product launches. (Reuters)

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business