Key Takeaways:
Rolls-Royce raised its full-year profit forecast 12% after H1 operating profit jumped 46% to £2.5 billion on civil aftermarket demand.
"The strong first-half performance reflects continued momentum across all three divisions," Tufan Erginbilgic, chief executive officer at Rolls-Royce, said. "Our transformation programme is delivering a step-change in both operational and financial performance."
The company now expects full-year underlying operating profit of £4.7 billion to £4.9 billion, up from a prior range of £4.0 billion to £4.2 billion. Free cash flow guidance was also raised to £3.8 billion to £4.0 billion, compared with an earlier forecast of £3.6 billion to £3.8 billion. Operating margins expanded to 22.5 percent in the first half, with all three divisions — civil aerospace, defence and power systems — posting increased profitability.
The upgrade signals that Rolls-Royce's turnaround under Erginbilgic is gaining traction as air travel demand drives higher engine flying hours and aftermarket services revenue. The London-based engine maker reported free cash flow of £2.0 billion in the six months ended June 30, supported by stronger earnings and increased investment.
Rolls-Royce's civil aerospace division benefited from a continued recovery in widebody aircraft utilization, while defence revenue was boosted by elevated geopolitical tensions and higher government spending. The company's performance contrasts with rival GE Aerospace, which also raised its full-year guidance in July on strong commercial services demand and record LEAP engine deliveries. Both manufacturers are benefiting from a multi-year upcycle in aftermarket services as airlines fly older fleets longer amid aircraft delivery delays at Boeing and Airbus.
The company's transformation programme, launched in 2023, has focused on cost reduction, supply chain optimization and pricing discipline. Rolls-Royce has cut thousands of jobs and streamlined its management structure as part of the effort to improve profitability and cash generation.
The guidance raise signals management expects the aftermarket recovery to sustain through the second half. Investors will watch the company's trading update in November for further detail on engine flying hour trends and defence order intake.
This article is for informational purposes only and does not constitute investment advice.
