Rolls-Royce Holdings PLC (LSE:RR.) delved into its strong interim results on Thursday, confirming the aviation sector’s booming recovery was key in last week’s guidance hike.
Orders from airlines for 240 engines during the six months to June marked a three-fold increase on the 96 penned last year.
A quarter-on-quarter jump in engine flying hours helped too, with the figures climbing from 65% of 2019 levels earlier this year, compared to 83% in the three months to June.
“It was the improvement in profits and margins in its civil aerospace division which stands out,” CMC Markets analyst Michael Hewson commented.
The department’s profits hit £405 million over the period, up on a £79 million loss last year, with overall company profit climbing to £524 million from a £111 million deficit.
Questions had been raised about the key drivers in the solid performance laid out in Rolls-Royce's surprise update last week, with analysts arguing over whether six months was too soon for new chief executive Tufan Erginbilgic’s turnaround plan to have such an effect.
That said, an increase in underlying operating margins from 2.4% to 9.7% this year backs up Erginbilgic’s comments that the master plan is indeed starting to take shape.
“Rolls’ turnaround story may be happening at a faster rate than previously expected,” Shore Capital analysts said in response.
Hewson said the Rolls-Royce had become “a completely different beast” to the company Erginbilgic described as a “burning platform” in January.
Backing Rolls-Royce with a share price target of 217p - a prospective rise of 18% on Wednesday’s close - Shore Cap said there could well be better things ahead.
The company’s defence business could well be weighted toward the second half, analysts tipped, even after penning £2.7bn worth of orders in the first six months of the year.
Shares climbed 3.2% to 189.75.