Rolls-Royce Lifts 2025 Profit Forecast After Strong Half-Year Performance
Rolls-Royce has raised its full-year 2025 outlook after posting a 50% rise in underlying operating profit to £1.7bn in the first half of the year, despite supply chain challenges and the impact of tariffs.
The FTSE 100 engineering group reported an operating margin of 19.1%, up from 14% a year earlier, driven by cost efficiency measures, stronger performance in its civil aerospace division, and growth in its power systems business. Free cash flow also rose to £1.6bn, supporting a net cash position of £1.1bn.
The company now expects full-year underlying operating profit of between £3.1bn and £3.2bn, up from previous guidance of £2.7bn to £2.9bn. Free cash flow is forecast at £3.0bn to £3.1bn.
“Our multi-year transformation continues to deliver,” said CEO Tufan Erginbilgic. “We have raised our guidance for 2025 and remain confident in our ability to deliver substantial growth beyond our mid-term targets.”
Key Financial Highlights
| Metric | H1 2025 | H1 2024 |
|---|---|---|
| Underlying revenue | £9.06bn | £8.18bn |
| Underlying operating profit | £1.7bn | £1.1bn |
| Operating margin | 19.1% | 14.0% |
| Free cash flow | £1.6bn | £1.2bn |
| Net cash | £1.1bn | £475m |
| Basic earnings per share | 15.7p | 8.95p |
Business Division Performance
Civil Aerospace
Rolls-Royce’s civil aerospace division reported a margin of 24.9% as aftermarket profitability improved and flying hours reached 109% of 2019 levels. The company also achieved milestones on engine efficiency, including the certification of an improved high-pressure turbine blade for the Trent 1000 TEN engine.
Power Systems
The power systems unit, which supplies backup generators for data centres, delivered a 15.3% operating margin, supported by strong demand and a 20% growth forecast in the segment.
Defence
Defence margins held steady at 15.4% despite supply chain pressures. Rolls-Royce secured a £1bn contract with the US Air Force and a £500m contract with the UK Ministry of Defence to support the EJ200 engine for Typhoon aircraft.
Strategic Developments
- Small Modular Reactors (SMRs): Rolls-Royce was selected as the sole provider for the UK’s first SMR programme, part of the government’s Great British Energy nuclear initiative. The project is expected to be cash flow positive by 2030.
- Efficiency and cost savings: More than £850m in cost savings have been achieved since 2022, with a target of £1bn by the end of 2025.
- International expansion: A joint venture with Turkish Technic will see a new engine maintenance facility built at Istanbul Airport by 2027.
For more on the UK’s SMR programme, see the UK Government’s nuclear energy policy.
Shareholder Returns
Rolls-Royce announced an interim dividend of 4.5p per share, payable in September, alongside a £1bn share buyback programme, £400m of which has already been completed.
Market Outlook
The company remains cautious about ongoing supply chain issues but expects to mitigate the impact of tariffs through cost optimisation. Mid-term targets include underlying operating profit of £3.6bn–£3.9bn and free cash flow of £4.2bn–£4.5bn.
For investors tracking the stock, Rolls-Royce’s updated guidance reflects a business increasingly resilient to global market pressures. Analysts and investors can access the full results presentation via the Rolls-Royce investor relations page.
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