UK-based global major power and propulsion systems group Rolls-Royce released, on Thursday, its results for the first half of this year (1H22). It recorded statutory revenues of £5.6-billion during the period, up from the £5.159-billion accrued during the same period last year (1H21). Statutory gross profit was £1.062-billion (up from £0.814-billion in 1H21) while statutory operating profit in 1H22 was £0.223-billion, a significant improvement over the £0.038-billion achieved in 1H21. The operating margin during 1H22 was 4%, as against 0.7% in 1H21.
However, overall, the group made a statutory loss of £1.611-billion in 1H22, as against a profit of £0.394-billion in 1H21. On the other hand, at negative £0.068-billion, free cash flow for operations during 1H22 was massively better than in 1H21, when it had been negative £1.174-billion. Group free cash flow in 1H22 was £0.077-billion, again a huge improvement over the negative £1.151-billion recorded during the same period last year. And during 1H22 the group had a net cash inflow from operating activities of £0.597-billion, as against a net cash outflow from operations in 1H21 of £0.679-billion. Net debt on June 30 this year stood at £5.142-billion, slightly down on the December 31, 2021, figure of £5.157-billion.
“We have progressed well in the first half of the year, with more than £1-billion improvement in free cash flow, strong order intake in Power Systems, increased engine flying hours and commercial discipline in Civil Aerospace, and targeted investment to support longer-term growth in Defence and New Markets,” affirmed Rolls-Royce CE Warren East. “We are actively managing the impacts of a number of challenges, including rising inflation and ongoing supply chain disruption, with a sharper focus on pricing, productivity and costs.”
The group’s Power Systems division recorded another record order intake during 1H22. The Defence business had a strong order book and had considerable clarity regarding future revenues. Civil Aerospace was continuing to recover, as engine flying hours increased as global commercial aviation headed back to pre-Covid-19-pandemic levels of traffic.
“As a result of the actions we have taken over the past few years, our Civil Aerospace business is becoming leaner and more agile, and we are executing on the levers of value creation we shared at our investor event in May,” he added. “This is setting us up to deliver on our commitments this year and in the future. We are making choices to manage the current challenges, deliver better returns, reduce debt, and generate long-term sustainable value.”
Among other things, Rolls-Royce was developing strategic partnerships with its most important suppliers. It was also focusing its supply chain on its best-performing suppliers. Because of supply chain constraints, all parts of the group had to increase their inventory; during the second half of the year, the company intended to reduce its inventory levels. Rolls-Royce had also received regulatory authorisation to sell its Spanish subsidiary, ITP Aero; the proceeds from that sale would be used to reduce the group’s debt.