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Warren East, the outgoing chief executive of Rolls-Royce, has insisted the company’s recovery remains on track, despite missing profit expectations and battling supply chain and inflation headwinds.

Shares in the FTSE 100 engineer had tumbled close to 10 per cent to 82p by late afternoon on Thursday as the company missed forecasts for profitability in the first half of the year. The group’s shares have lost more than 35 per cent since the start of the year.

Rolls-Royce said its underlying operating profit in the first six months of the year fell to £125mn, from £307mn a year earlier, missing consensus forecasts by 24 per cent. It made an underlying loss of £111mn before tax in the half-year, compared with a £133mn profit in the same period the year before.

East, who hands over to oil industry veteran Tufan Erginbilgic in January, shrugged off the share price drop, stressing that the group’s profit performance in the first half of 2021 had been flattered by two one-off items in particular, a £45mn gain in its defence business and a £270mn “accounting technicality” based on a revaluation of some assets in the civil aerospace business.

“We have an awkward first half 2021 comparison to make versus the first half 2022 in terms of profit,” he said.

The company expects profits to recover in the second half of the year as flying hours increase, boosting the number of visits needed to maintain the group’s engines, which are used in many of the world’s large passenger jets.

Rolls-Royce, which derives a large part of its income from manufacturing and servicing engines for Boeing and Airbus’s widebody aircraft, has emerged slowly from the pandemic as international restrictions on travel have remained in some regions.

East said that in the first half of 2022 Rolls-Royce engines flew about 60 per cent of the hours they flew in 2019, the year before the pandemic, and were now at about 65 per cent of that level.

Covid-19 lockdowns in China had been the “key retardant for the Rolls-Royce fleet of engines”, East said, although he stressed that the company was experiencing strong demand and full flights again elsewhere in Asia. The company expects flying hours to recover to pre-pandemic levels by 2024.

East also pointed to a marked improvement in free cash flow of £1.1bn, a strong order intake in its power systems business and a 4 per cent increase in underlying revenues to £5.31bn for the period.

The group stuck to its forecast for cash flow to be “modestly positive” for the whole year after burning £68mn in cash in the first half. The figure compares with a cash burn of £4.2bn in 2020 at the height of the pandemic, which grounded much of the global aviation fleet.

Net debt remained broadly flat at £5.1bn. The expected receipts from the sale of ITP Aero, its Spanish subsidiary, will be used to pay down some of this.

Nick Cunningham, analyst at Agency Partners, said the share price drop was “symptomatic of the same thing. Rolls-Royce is at an absolute transition point from huge losses to some sort of normal profitability.”

East said the company was doing a “lot of blocking and tackling” to manage challenges, such as inflation and supply chain constraints, which were the result of “post-Covid indigestion”.

He said the company had built some “good foundations” during his seven-year tenure. Under Erginbilgic, Rolls-Royce would have to gear up and “be ready to grasp the opportunity in net zero”. Britain aims to cut greenhouse gas emissions to net zero by 2050.

East added: “We do have a very strong position in widebody civil aerospace. It is a cash engine when it is in steady state . . .[one] that is capable of funding the investment in the energy transition.”

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