Rolls-Royce to cut costs while profits rise 34pc

Suzie Neuwirth
ENGINEERING firm Rolls-Royce unveiled a strong set of first-half results yesterday, with pre-tax profits up 34 per cent to £840m, thanks to booming demand for aircraft engines.

The FTSE 100-listed firm’s order book grew 15 per cent to £69.2bn and revenues grew 27 per cent to £7.3bn.

Chief executive John Rishton said that while the results showed “good progress”, it is clear the company has “a lot more to do on cost and cash”.

“While underlying profits were up 34 per cent our costs are rising faster than revenues, which is not good enough and needs to change,” Rishton told reporters.

Rival plane engine manufacturers, such as General Electric, have aggressively cut costs in recent times, including slashing staff.

“Rolls-Royce is continuing to focus on cost reductions, supply chain rationalisation and working capital improvements. Improving inventory turns by 0.5x is a £400m opportunity,” said broker Liberum Capital. “We hear there is a market cultural improvement under new management. The margin has headroom to improve.”

The company, which has now assumed management control of German engine maker Tognum two years after buying it, maintained its full-year guidance.