Turnaround plan at Rolls-Royce starting to reap dividends

Rolls-Royce has said that a turnaround plan implemented by the engineering giant is starting to pay off after experiencing a strong first six months of the year.

In a recent trading update, issued ahead of its half-year results, which are due to be published on Thursday, the firm upgraded its profit forecasts.

The company, which has its civil aerospace and defence divisions in Derby, said it will make an underlying profit of £660 million to £680 million in the first six months of year – up from its forecast of £328 million.

Meanwhile, full-year profits are expected to reach between £1.2 billion and £1.4 billion – a significant increase from a previous forecast of £934 million.

According to chief executive Tufan Erginbilgic, the firm’s transformation programme is the key factor behind the turnaround.

He said: “Our multi-year transformation programme has started well with progress already evident in our strong initial results and increased full year guidance for 2023.

“There is much more to do to deliver better performance and to transform Rolls-Royce into a high performing, competitive, resilient, and growing business.”

According to Rolls-Royce, its margin improvements are being driven by its civil aerospace and defence businesses.

The civil aerospace business is continuing to win new orders – including its biggest ever order of Trent XWB-97 engines, with a Memorandum of Understanding for 68 engines (plus 20 options) for Air India.

Meanwhile, its defence business also continued to win new work in the first six months of the year – most notably the announcement that the AUKUS submarine programme will be powered by Rolls-Royce nuclear reactors built in Derby.

On the back of this, Rolls-Royce has since announced that it plans to double the size of its Raynesway site, creating almost 1,200 new jobs.

Mr Erginbilgic said: “Despite a challenging external environment, notably supply chain constraints, we are starting to see the early impact of our transformation in all our divisions.

“Better profit and cash generation reflects greater productivity, efficiency and improved commercial outcomes.”