In six months, the group reported a 50% surge in underlying operating profit to £1.7 billion
LONDON: Rolls-Royce Holdings PLC delivered a markedly strong first-half performance for 2025, underscoring the momentum of its multi-year transformation despite headwinds from supply chain disruptions and rising tariffs.
In the six months to June 30, the group reported a 50% surge in underlying operating profit to £1.7bn, translating into a margin of 19.1%, with gains attributed to improved operational effectiveness, commercial discipline and strategic initiatives.
Free cash flow for the period rose to £1.6bn, buoyed by higher profitability and growth in long-term service agreement (LTSA) balances. In response to this performance, Rolls-Royce raised its full-year guidance, now forecasting underlying operating profit between £3.1bn and £3.2bn and free cash flow in the range of £3.0bn to £3.1bn.
CEO Tufan Erginbilgic cited continued transformation progress across all business units, with Civil Aerospace recording improved aftermarket profitability and milestone achievements in time-on-wing metrics. Power Systems benefited from expanding demand in data centres and governmental sectors, while Rolls-Royce SMR’s selection as the sole provider for the UK’s inaugural small modular reactor programme marked a strategic inflection point for future revenue generation.
Operating margin growth was particularly evident in Civil Aerospace, which rose to 24.9% from 18% in H1 2024, driven by strong aftermarket revenues and spare engine sales. Defence margins held steady, while Power Systems advanced significantly to 15.3% from 10.3%, supported by profitable growth in energy generation.
Rolls-Royce also reinforced its balance sheet resilience. Net cash stood at £1.1bn, up from £475m at FY 2024, while liquidity increased to £8.5bn. The group’s TCC/GM ratio—representing total underlying cash costs to gross margin—improved to 0.35x, reflecting sustained cost discipline and inflation offsetting measures.
In terms of capital return, the group confirmed a 4.5p interim dividend to be paid in September. Additionally, £0.4bn of its £1bn share buyback programme has been executed during the first half, contributing to an anticipated £1.9bn return to shareholders in 2025.
Erginbilgic noted that these results reinforce confidence in the company’s mid-term goals of £3.6bn–£3.9bn in operating profit and £4.2bn–£4.5bn in free cash flow, labelling those targets “a milestone, not a destination.”