Rolls-Royce shares jump as H1 profit surges 46%, raises full-year guidance

Rolls-Royce shares surged on Thursday after the company raised its targets and reported a near 50% increase in operating profits for the first half of the year, driven by a boom in defence spending.

The FTSE 100 engineering firm posted £2.5 billion in underlying operating profit for the first half, up 46% compared to the same period last year, citing rising profitability across all divisions.

The company now expects full-year underlying operating profit of between £4.7 billion and £4.9 billion, up from its previous forecast of £4 billion to £4.2 billion. Analysts had projected around £4.2 billion for the year.

CEO Comments

Chief Executive Tufan Erginbilgic, who has led a sweeping overhaul of the aerospace and engineering group, said the company's "transformation continues to deliver."

"We are demonstrating that Rolls-Royce is now a very different company to that of the past," he said. "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."

The former BP executive noted that the company had improved profitability in its civil aerospace division and established a leading position in defence.

Market Reaction

Shares in Rolls-Royce rose nearly 4% in early trading.

Statutory profit for the first half was approximately £1.6 billion, compared to £4.4 billion in the same period last year. Company leadership attributed the decline to disposals and exchange rate movements.

The company announced an interim dividend of 6p per share, as Erginbilgic indicated Rolls-Royce could raise its guidance for 2026. Basic earnings per share stand at around 19p, according to new company data.

Rolls-Royce shares have risen by over 42% in the last year, with notable gains in December and June. Deals on small modular reactors across Europe have helped extend the company's influence in the nuclear energy sector.

Defence Outlook

Erginbilgic expressed "confidence" that profit targets would be met across defence, civil aerospace, and power systems.

The company is £1.4 billion through a £2.5 billion share buyback programme for the year, which will continue until 2028.

Emily Sawicz, industrials senior analyst at RSM UK, said there was "good news" for Rolls-Royce as all divisions had performed "strongly."

"In defence, Rolls's development programme has been bolstered by orders from several NATO members including the UK and Canada," Sawicz said. "The uptick in UK spending set out in the Defence Investment Plan (Dip) will provide the confidence for the business to invest, whilst supporting the UK supply chain."

The comments reference plans to spend £15 billion more on defence over the next four years, though questions remain over how new Defence Secretary Wes Streeting will fund the plan. Chancellor John Healey is also under pressure to find additional funding to raise defence spending to 3% by 2030.

Order Backlog

Rolls-Royce reported an order intake of £2.4 billion across its defence division, with a backlog of £17.5 billion — equivalent to "more than three years of revenue."

The company highlighted deals to supply engines for Turkish jets and the Australian navy's new general-purpose frigates.

Trading cash flow for defence has also increased year-on-year, with the division trailing only civil aerospace in performance this year.