Rolls-Royce recovery revs up, but CEO stays cautious

London

WARREN East's reboot of struggling industrial giant Rolls-Royce Holdings Plc gathered pace as the aircraft-engine maker's first-half profit more than doubled, aided by the chief executive's restructuring plan.

At the same time, Mr East left his 12-month outlook for "modest" performance improvements unchanged in guidance on Tuesday, warning that the London-based company faces production hurdles in the second half that will make or break its year and indicate whether the recovery has truly taken hold.

Rolls-Royce shares surged 10 per cent, the most in a year, wiping out declines on Monday when the company reined in expectations for its long-term cash goal.

Under Mr East, recruited in 2015 after running semiconductor maker ARM Holdings Plc, the group has cut management posts, reorganised units and begun a strategy review as it repositions to tap the biggest jetliner backlog in history.

"We've made good progress but there's still a lot to do and I'm telling people this is no time for complacency," Mr East said. "In particular as we continue to manage the balance of in-service issues in civil aerospace alongside key new product introductions and increased production volumes."

Rolls-Royce stock was trading 9.8 per cent higher at 975 pence at 10.28 am in London on Tuesday, extending gains this year to 47 per cent and valuing the company at £17.9 billion (S$32.1 billion).

Adjusted pretax profit jumped to £287 million in the first half from £104 million a year earlier as sales advanced 12 per cent to £7.57 billion, Rolls-Royce said in a statement. Analysts had predicted earnings of £158 million, according to data compiled by Bloomberg.

Among the second-half challenges identified by Mr East are final development of new engines to power Airbus's stretched A350-1000 and Boeing Co's largest 787-10, as well as the A330neo, which has faced a series of delays. BLOOMBERG