Rolls-Royce share jump as profit tops expectations

Rolls-Royce shares jumped on Thursday after the company hiked its targets and posted a near 50 per cent jump in operating profits in the first half of the year, as it reaps the rewards of a boom in defence spending.

The FTSE 100 engineering firm said rising profitability across all of its ⁠divisions ​resulted in £2.5bn ​underlying operating profit for the first half, up 46 per cent in the same period last year.

It now expects to ​make £4.7bn to £4.9bn in underlying operating ⁠profit, up from its previous targets of between £4bn and £4.2 bn. Analysts had forecast profit of around £4.2bn for the year.

Chief Executive Tufan Erginbilgic, who has pushed through 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 said the company had lifted profitability in its civil aerospace division and established ⁠its leading position in defence.

Shares in the company rose nearly four per cent in early trading.

Statutory profit in the first half of the year was around £1.6bn, compared to £4.4bn in the first six months of last year, which bosses said was down to disposals and exchange rate movements.

The company announced that an interim dividend of 6p per share would be paid out as chief executive Tufan Erginbilgic said Rolls-Royce could raise its guidance for 2026. Basic earnings per share come to around 19p, according to new company data. 

Rolls-Royce’s stocks has soared in recent months, rising by over 42 per cent in the last year and enjoying a jump over last December and June. Deals on small modular reactors across Europe have helped it extend its influence over the nuclear energy sector. 

Erginbilgic said he had “confidence” that targets on profit would be reached across defence, civil aerospace and power systems. 

The company is also £1.4bn through a £2.5bn share buyback programme for the year, which will then run on until 2028.

Emily Sawicz, industrials senior analyst at the accountancy RSM UK, said there were “good news” for Rolls-Royce as all of its 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 refer to plans to spend £15bn more over the next four years on defence, though questions are piling up for new defence secretary Wes Streeting to fund the Dip. 

Chancellor John Healey is also under pressure to find extra cash to raise defence spending to three per cent by 2030 given he resigned from Sir Keir Starmer’s government over the issue. 

Rolls-Royce said it had an order intake of £2.4bn across its defence division, with the backlog of £17.5bn now standing at equivalent to “more than three years of revenue”. 

It hailed deals to supply engines for Turkish jets and the Australian navy’s new general-purpose frigates. 

Its trading cash flow for defence has also increased on the year, with the division following just civil aerospace in performance this year.