Rolls-Royce Lifts Forecast as Profits Soar by 50%

Stronger margins and aerospace demand fuel optimism – is the engineering giant entering a golden era?

A Flying Start to 2025

Rolls-Royce (LON: RR) has upgraded its full-year profit forecast after reporting a 50% surge in first-half operating earnings, driven by robust demand across its Civil Aerospace and Power Systems divisions. Investors responded quickly, pushing shares up more than 10% on the news.

This marks a strong turnaround story for one of Britain’s most iconic engineering firms, as it continues to recover from the pandemic and capitalise on the aviation sector’s resurgence.

Key Financial Highlights (H1 2025)

• Underlying operating profit: £1.7 billion (up from £1.2 billion)
• Revenue: £9.1 billion (up 13% year-on-year)
• Operating margin: 19.1% (up from 14.0%)
• Free cash flow: £1.6 billion (up from £1.2 billion)
• Revised full-year forecast: £3.1–£3.2 billion in underlying operating profit
• Dividend: Interim payout of 4.5p per share
• Share buyback: £400 million completed of £1 billion plan
• Net cash: Increased to £1.1 billion from £475 million at end of 2024

Civil Aerospace Powers Ahead

Rolls-Royce’s Civil Aerospace division was the standout performer:

• Revenue: £4.8 billion (up 17%)
• Operating profit: £1.2 billion (vs £740 million in H1 2024)
• Margin: Soared to 24.9%
• Engine flying hours: 109% of 2019 levels
• Shop visits: Increased by 12%, with large engine deliveries at 122 units

Jefferies analysts noted a “40% beat” on EBIT forecasts, with performance “already near the top end of mid-term guidance”.

Power Systems and Defence in Focus

• Power Systems revenue rose 20% to £2.0 billion, with profit nearly doubling to £313 million, supported by demand from data centres and government contracts.
• The Defence division remained steady, delivering £2.2 billion in revenue and £342 million in operating profit. Though flat year-on-year, last year’s figure included a one-off £180 million benefit.

What’s Next for Rolls-Royce?

The company cautioned that second-half results may be more modest due to:

• Fewer one-off contract margin benefits
• Increased investment in maintenance
• Supply chain costs reducing free cash flow by up to £200 million

However, flying hours are still expected to grow to 110%–115% of pre-COVID levels, with 1,400–1,500 shop visits forecast. Long-term service agreements are also expanding.

Conclusion: Is Rolls-Royce Back in Top Gear?

Rolls-Royce is showing clear signs of a powerful resurgence, with its Civil Aerospace division firing on all cylinders and strong cash generation fuelling dividends and share buybacks. While some challenges remain in the second half—particularly cost pressures and flat defence growth—the overall outlook is encouraging.

For investors, the upgraded forecast, surging margins and bullish sentiment suggest Rolls-Royce could be set for a sustained run. With global air travel recovering, and demand for energy and defence solutions remaining robust, this British engineering icon may just be entering a new growth chapter.

Sources: (Investing.com, BBC.co.uk)