UK-based global major propulsion and power group Rolls-Royce on Thursday reported “significantly improved” results for the first half of this year (1H23), in year-on-year terms. This better performance was led by its civil aerospace and defence businesses and also reflected the success of the group’s transformation programme. As a result, Rolls-Royce was, in late July, able to upgrade its guidance for its performance for this year and is now forecasting an underlying operating profit of £1.2-billion to £1.4-billion, and a free cash flow of £0.9-billion to £1-billion, for 2023.

“Our multi-year transformation programme has started well with progress already evident in our strong initial results and increased full year guidance for 2023,” affirmed Rolls-Royce CEO Tufan Erginbilgic. “There is much more to do to deliver better performance and to transform Rolls-Royce into a high-performing, competitive, resilient and growing business.”

In terms of the actual results recorded in 1H23, the group’s underlying revenues came to £6.95-billion (up from £5.308-billion in 1H22), while underlying operating profit was £673-million (as against 1H22’s £125-million). The underlying operating margin for 1H23 was 9.7%, whereas that for 1H22 had been 2.4%. The group recorded an underlying profit (before taxation) of £524-million in 1H23, while during 1H22 it had reported an underlying loss (before taxation) of £111-million. During the first semester of this year, it had had a free cash flow of £356-million, whereas during the same period last year the figure had been negative £68-million.

“Our people are committed, passionate and full of energy,” he highlighted. “Despite a challenging external environment, notably supply chain constraints, we are starting to see the early impact of our transformation in all our businesses. Better profit and cash generation reflect greater productivity, efficiency, and improved commercial outcomes. We have tightly managed our cost base to offset inflationary cost pressures.”

Regarding the group’s various businesses, Civil Aerospace benefitted from higher profitability in its aftermarket segment and increased sales of large spare engines, plus internal commercial optimisation and cost efficiency actions, to turn its operating margin from negative 3.4% in 1H22 to positive 12.4% in 1H23. The Defence business combined a strong growth in revenues with cost efficiencies to achieve a 1H23 operating margin of 13.6%. Power Systems, however, reported a lower operating margin in 1H23 than in 1H22, recording a figure of 7% during this year’s first semester. However, this business was expected to do better during the second half of this year, as a consequence of pricing actions, cost efficiencies, and seasonally-based higher sales volumes.

“We have a strong portfolio of products and technologies in growing end markets and have secured key contract wins that will create future value and profitable growth,” pointed out Erginbilgic. “Our continued transformation will grow our business and allow us to play a stronger role in the energy transition.”