Warren East’s efficiency plan pays off as Rolls-Royce sees return to profit

Aeroplane engine-maker Rolls-Royce reported a return to profit in its half-year results this morning, reversing a loss of more than £2bn this time last year.

The figures

Chief executive Warren East’s two-year plan to drive efficiency led the company to increase revenue by 12 per cent to £7.57bn.

After suffering a loss of £2.15bn last year, the manufacturer this year recorded a profit of £1.94bn in the six months to 30 June.

Although headline figures were largely affected by a fluctuating currency, underlying revenue was up six per cent.

Shares in the company were trading up more than 5.5 per cent this morning.

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Why it’s interesting

Last year the company saw its biggest loss ever, just a year after newly appointed chief executive Warren East announced a plan to drive efficiency across the group by cutting costs and streamlining senior management.

But East said in the latest trading update that cost savings were now ahead of plan and contributing to the higher-than-expected results. He stated that the company will be on track to cut costs of £200m by the end of the year.

Underlying revenue in the company’s biggest sector, civil aerospace, grew the most at 14 per cent. Improvement was also seen in power systems and nuclear operations.

But weaker offshore markets hit marine operations, which make up eight per cent of total earnings. Underlying revenue was down 15 per cent, while performance also dipped in defence aerospace.

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What the company said

CEO Warren East said that despite the good results, “this is no time for complacency”.

Strong execution and a focus on delivering our customer commitments remains essential as we continue to manage in-service issues in Civil Aerospace alongside key new product introductions and increased production volumes.

Read more: Rolls-Royce gears up for an improved 2017 after record loss last year