ii view: Rolls-Royce powering ahead on all engines

Credit: Rolls-Royce via Flickr.

First-half results to 30 June

• Adjusted revenues up 26% to £11.3 billion
• Underlying operating profit up 46% to £2.5 billion
• Interim dividend of 6p per share, up from 4.5p last year
• Completed £1.4 billion of a £2.5 billion 2026 share buyback programme

Guidance:

• Now expects full-year 2026 underlying operating profit of £4.7-4.9 billion, up from a previous £4.0-4.2 billion
• Continuing to pursue share buybacks of £7-9 billion between 2026 and 2028, with £2.5 billion in 2026

Chief executive Tufan Erginbilgic said:

“Our transformation continues to deliver, and we are demonstrating that Rolls-Royce is now a very different company to that of the past. We have unlocked new growth opportunities across the Group and created a resilient and diversified portfolio, with three strong businesses that can respond to changes in the external environment with agility and pace.”

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ii round-up:

Rolls-Royce Holdings (LSE:RR.) develops and delivers complex power and propulsion solutions for applications in the air, at sea and on land.

Civil Aerospace divisional sales include supplying large aircraft engines as well as those for business aviation.

Defence products include engines for fighter and military transport aircraft as well as those for helicopters and nuclear submarines.  

Power System customers include boat and locomotive builders, industrial manufacturers, and data centre operators.

A former New Markets division, seeking net zero climate change opportunities, is now focused on nuclear or Small Modular Reactors (SMR) and hydrogen powered engines.

For a round-up of these latest results announced on 30 July, please click here.

ii view:

Founded in 1906, Rolls-Royce today employs around 43,000 people. Civil Aerospace generated most profits in 2025 at 52%, followed by Power Systems at 30% and Defence the balance of 18%. Geographically, the US accounted for most sales last year at 27%. Other major customers included the UK at 14% and China and Germany at 7% and 6% respectively.

For investors, ongoing conflicts and heightened geopolitical tensions raise the potential for aerospace disruption and possible cancellation of engine flying hours and related airline payments to Rolls. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap. Supply chain challenges persist, with operational issues previously flagged at major civil aircraft makers Boeing Co (NYSE:BA) and Airbus SE (EURONEXT:AIR) potentially slowing required deliveries. Public trust in nuclear safety and potential SMRs near to major populations has yet to be fully tested.

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More favourably, performance improvement initiatives under CEO Tufan Erginbilgic, including a high focus on increasing productivity and reducing costs, continue to be pushed. Demand across the group’s three areas of air travel, defence and power generation remains robust. A focus on shareholder returns sees share buybacks progressed and the shares on a forecast dividend yield of around 1%. Hopes for SMRs also persists, with the UK government previously announcing Anglesey in Wales as the location for its first UK SMR.

On balance, and while exposure to the historically higher risk travel industry continues to warrant some caution, diversified growth and a consensus analyst fair value estimate above £17 per share offer grounds for continued longer-term optimism.

Positives: 

• Investing in climate change related product innovation
• Ongoing share buyback programme

Negatives:

• Trump trade tariffs persist
• Supply chain challenges

The average rating of stock market analysts:

Buy