Strong sales boosts Rolls-Royce profits

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Manufacturing News, Source : TheManufacturer.com
Published : 27 Jul 2006 15:09
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Aerospace engine-maker, Rolls-Royce, has announced a buoyant half year results. Orders are up from £23.0 billion for the half year 2005 to £25.1 billion this year, and underlying profit up by 22 per cent to £324 million.

Rolls-Royce has continued to make good progress in the first half of 2006, with increased profit and positive cash flow.

The Group said its performance has been built on a consistent strategy, supported by investment in market access, technology and capability.

This growth has been achieved despite the weakening US dollar exchange rate, increasing materials costs and pressure on the global supply chain. The focus on cost reduction and increased efficiency within the group's operations and supply chain and its increasing emphasis on overhead reduction are helping the group to deal with these headwinds.

Aftermarket services sales increased by six per cent on an underlying basis and represented 54 per cent of group sales. The group continues to expect double-digit growth in aftermarket sales for the full year.

Underlying profit before tax increased by 22 per cent to £324 million and a cash inflow of £122 million was generated, resulting in positive net cash of £457 million on the balance sheet at the end of June (2005 half-year net debt £37 million). Average net cash of £83 million represented a £460 million improvement over the £377 million of average net debt for the same period in 2005.

The introduction of new products and the continued success of existing programmes have once again resulted in strong order intake for the period. New orders in the first half of 2006 reached £5.1 billion (2005 half-year £6.4 billion), and brought the period-end firm and announced order book to £25.1 billion (2005 half-year £23.0 billion).

The Group made further progress with its factory modernisation programme. The latest in its series of new facilities was opened at Barnoldswick, in the UK, and investment in Derby, Bristol and Indianapolis continues in order to improve productivity and reduce costs by developing world-class manufacturing facilities and processes.

The Group has continued to expand its services capabilities. The recently opened repair and overhaul facility in Derby is now fully operational. Hong Kong Aero Engine Services Limited, of which Rolls-Royce owns 45 per cent, announced plans to expand its capacity to cater for growing regional repair and overhaul activity. Construction began in Germany of the fifth Trent engine overhaul facility, a joint venture between Rolls-Royce and Lufthansa Technik. The Group took full control in March of Data Systems & Solutions, its former joint venture with SAIC in predictive services.

Sir John Rose, Chief Executive, said: "We have continued to make good progress, despite the challenges of a weak US dollar and increased raw material costs. The strength of our order book, continuing growth of services sales and our progress with efficiency improvements support our expectations of increased profits and positive cash flow for 2006. As a result we have increased our interim payment to shareholders by ten per cent."