30th Jul 2026 09:16
(Alliance News) - Rolls-Royce Holdings PLC on Thursday raised profit and free cash flow guidance after beating expectations in the first half of 2026, with improved profit margins a highlight.
The London-based aerospace and defence company said pretax profit slumped 60% to GBP1.93 billion in the first six months of 2026 from GBP4.84 billion the year prior. The prior year period was boosted by a GBP679 million gain on a disposal.
Operating profit, which strips out this item, increased 17% to GBP2.42 billion from GBP2.07 billion. Underlying operating profit grew 46% to GBP2.53 billion from GBP1.73 billion, which RBC Capital Markets said was 38% ahead of GBP1.84 billion consensus.
Revenue rose 21% to GBP11.45 billion from GBP9.49 billion, outstripping GBP10.17 billion consensus.
"Our transformation continues to deliver, and we are demonstrating that Rolls-Royce is now a very different company to that of the past," Chief Executive Tufan Erginbilgic said.
Shares in the firm rose 3.7% to 1,432.24 pence each in London on Thursday morning, having traded as high as 1,463.00p, approaching the stock's all-time high price of 1,532.60p.
Reflecting the strong start to the year, Rolls-Royce raised annual guidance. It now expects to deliver underlying operating profit of GBP4.7 billion to GBP4.9 billion, ahead of GBP4.2 billion consensus, and free cash flow of GBP3.8 billion to GBP4.0 billion for the full-year, above GBP3.7 billion consensus.
Its profit guidance was previously ranged at GBP4.0 billion to GBP4.2 billion, and the cash flow goal was GBP3.6 billion to GBP3.8 billion.
Free cash flow totalled GBP1.96 billion in the first half, up from GBP1.58 billion a year before.
Rolls-Royce reported improved profitability across all three divisions. Civil Aerospace delivered an underlying operating margin of 25.3%, up from 24.9% on-year, driven by a strong large engine aftermarket performance, with higher long-term service agreement margins and time and materials performance, and contractual improvements.
Defence delivered an underlying operating margin of 21.0%, soaring from 15.4% a year ago, reflecting actions to support strong aftermarket performance alongside continued self-help, Rolls-Royce said.
Power Systems reported an underlying operating margin of 20.3%, improved from 15.3%, driven by strong performance in power generation, reflecting higher volumes, an improved mix, and commercial optimisation, alongside higher governmental profit, the company said.
Cost efficiency actions continue to deliver results, it added.
Rolls-Royce lifted its interim dividend to 6.0 pence per share from 4.5p. It said it has completed GBP1.4 billion of the planned GBP2.5 billion share buyback for 2026 to date, which is part of a multi-year buyback programme totalling GBP7 billion to GBP9 billion across 2026 to 2028.
By Jeremy Cutler, Alliance News reporter
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