Rolls-Royce has reported a fivefold surge in underlying operating profit to £673m for the first half of 2023, up from £125m a year earlier, driven by a 12% increase in servicing charges for its jet engines. The FTSE 100 engineering firm said the price rises contributed to a 31% rise in underlying revenues to nearly £7bn.
Chief executive Tufan Erginbilgic, who took over in January, admitted the company should have raised prices sooner, describing the move as “obvious” but not “easy”. He denied that the increases added to inflationary pressures, noting that Rolls-Royce had not benefited from inflation last year. “In a way, this company should have priced things in the right way rather than losing money on them,” he said.
Rolls-Royce engines power aircraft such as the Airbus A350 and A380 and the Boeing 787 Dreamliner. The company charges for maintenance based on flying hours, which have recovered to 83% of pre-pandemic levels as Chinese international travel returns. Erginbilgic said the results were achieved despite supply chain issues and a £98m provision after losing a legal dispute with Goodrich Corporation, a unit of RTX.
The company has cut fewer than 100 jobs in indirect roles and centralised purchasing of non-specialist items. Erginbilgic will present a strategic review in November, likely focusing on improving investor returns. Shares rose nearly 4% on Thursday and are up over 80% year to date, reflecting investor confidence in the turnaround.
Rolls-Royce’s defence business, which builds nuclear reactors for UK submarines, has also benefited from the Aukus pact with Australia and the US. The results came a day after BAE Systems reported record orders, boosted by demand from the Ukraine conflict.
