H1 results have demonstrated good cost-cutting performance Rolls-Royce posted solid H1 results, with Civil jumping back into profit despite trough sales. This illustrates the early impacts of the group''s restructuring, although the performance was partly helped by a GBP160m positive LTSA retrospective adjustment. FCF performance was also a point of debate, with focus on the impact of delays on 787 concession payments. Despite a more cautious take on engine flight hours development for the year, FCF guidance was reiterated, with no material headwinds expected to spill over into 2022. Lastly, we welcome the new CFO''s diagnostic of having to deliver on: (1) the short-term restructuring promises; (2) reducing reporting complexity, although this has been a hot topic for years for the group; and (3) investing adequately in the business transition. Operating leverage set to help deliver strong margins over the longer term In this note we illustrate how cost cutting appears to have provided a massive boost to Civil performance in H1 to 10.7% true underlying gross profit (-14% in H2-20). Going forward, the volume recovery, especially in aftermarket, should enable a solid profit recovery. Over the long term, management sees Civil as able to deliver mid-teens operating profit margin, which would represent a massive increase vs. consensus expectations at 9.4% on 2025, although the volume recovery should take longer than that to yield its full operating leverage benefit. TP raised to GBp120, as we wait on some deleveraging and traffic recovery Rolls-Royce''s story remains one of de-leveraging first and foremost, which will come through the targeted disposals and returning to cash-generating mode (still expected in H2 21). H1 results were a step in the right direction but the real positive catalysts will come once the ITP disposal is complete and as flight hours recovery accelerates. We raise our EPS by 25%/4% on 2022-23, mainly reflecting a faster than...