Shares in Rolls-Royce rocketed as strong profits provided evidence of an emphatic recovery from “the dark days of the pandemic years”.
The manufacturing giant said its underlying operating profits were more than five times the amount reported a year earlier and its shares leapt to the top of the FTSE 100 after it revealed the extent of its soaring half-year profits.
The City responded as it said it was reaping the rewards of a structural overhaul which saw it cut 9,000 jobs worldwide and reduce wider costs.
Share reached heights not seen since the start of the pandemic and reflected this new account of the return of international air travel.
While shares were some distance from the 283.64p level in September 2019 it was a welcome sight set against the low of 39p at the same time a year later.
The aircraft engine manufacturer posted underlying operating profits of £673 million for the six months to June 30, up from £125m it reported a year earlier.
READ MORE: Air travel boost for Scottish Rolls-Royce workers
On a statutory basis, it swung to a pre-tax profit of £1.4 billion from losses of £1.8bn a year ago.
The results come a week after Rolls-Royce, which employs around 600 at its Inchinnan site in Renfrewshire, upped its earnings outlook for the full year to between £1.2bn and £1.4 bn this year, up from the previously guided range of £800m to £1bn.
Rolls-Royce has also seen its key civil aerospace division boosted by a recovery in long-haul travel following the pandemic, which is driving demand from airlines for engine maintenance.
Tufan Erginbilgic, Rolls-Royce chief executive, hailed the structural overhaul and added aspects of modernisation were continuing.
READ MORE: Rolls-Royce in Scottish jobs pledge as flight demand improves
"Our multi-year transformation programme has started well with progress already evident in our strong initial results and increased full year guidance for 2023,” Mr Erginbilgic told the City. “There is much more to do to deliver better performance and to transform Rolls-Royce into a high-performing, competitive, resilient, and growing business. We will share the outcome of our strategy review along with medium-term goals for the group in November.
“Our people are committed, passionate and full of energy. 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.”
READ MORE: New tenants move into former Rolls-Royce factory
The chief executive also said: “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. Our continued transformation will grow our business and allow us to play a stronger role in the energy transition."
There was a significant improvement in flying hours by engines from its civil aerospace operation, up 36% in the first half and reaching 83% of 2019 levels, 240 large engine orders set against 96 for the same time last year.
The civil aerospace division delivered operating profits of £405m compared with a loss of £79m a year ago.
The group's power systems division saw lower profit margins in the first, but Rolls-Royce said it expects this to improve in the second half due to pricing actions and cost savings.
Operating profits grew by a third to £261m in its defence business - which the group said was its most "resilient" division - with the sector benefiting from increased global demand as a result of the Russian war on Ukraine.
Andy Chambers, director at Edison Group said that the initial results of the transformation programme enhanced performance and all divisions made positive contributions.
He said: “The recovery from the dark days of the pandemic years appears to be progressing well and investors may now be able to take a more favourable view of Rolls-Royce’s potential once again."
Shares in Rolls-Royce closed up 8.3p, or 4.51% at 192.2p.
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