Rolls-Royce looks to manage inflation as profit margins squeezed

Rolls-Royce said it is looking to manage rising inflation and supply chain disruption as it revealed its first half results this morning (August 4).

The Derby manufacturer made an underlying operating profit of £125m in the first half of the year, compared with £307m a year ago, on underlying revenue of £5.31m.

The firm said that although profit margins were lower in its first half, they are expected to improve in the second half of the year.

Warren East, chief executive, said: “We have progressed well in the first half of the year, with more than a £1bn 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.

“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. As a result of the actions we have taken over the last 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. 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.”