Rolls-Royce Holdings Plc 2026 Half Year Results | Rolls-Royce

Strong operational and financial performance driven by transformation; FY26 guidance raised

• Strong first half performance driven by continued execution of our transformation programme
• Underlying operating profit rose by 46% to £2.5bn; underlying operating margin of 22.5% with higher profitability in all divisions reflecting the impact of our strategic initiatives and operational improvements
• Free cash flow of £2.0bn driven by higher underlying operating profit and with increased investments to support profitable growth to the mid-term and beyond
• Full year 2026 guidance raised; we now expect £4.7bn-£4.9bn underlying operating profit and £3.8bn-£4.0bn free cash flow
• Further confidence in mid-term guidance, supported by operational and financial progress to date
• Resilient and diversified portfolio with three high-performing and growing businesses, net cash of £2.1bn and a best-in-class TCC/GM ratio of 0.27x
• Shareholder returns: An interim dividend of 6.0p per share to be paid in September; we have completed £1.4bn of the planned £2.5bn share buyback for 2026 to date, part of our multi-year buyback programme totalling £7bn-£9bn across 2026 to 2028

Tufan Erginbilgic, CEO 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. 

We have made significant operational and strategic progress in the first half of the year. In Civil Aerospace, where we continued to improve our aftermarket profitability, we have also effectively eliminated aircraft on ground, providing a significant operational benefit to our customers. In Defence, we continued to establish our leading position in autonomous propulsion with several key milestones achieved in the period. In Power Systems, we captured further profitable growth in data centres, including growing prime power demand. Following its recent win in Sweden, Rolls‑Royce SMR has now been successful in every competitive European nuclear tender and is uniquely positioned to become a global market leader. 

A strong start to the year enables us to raise our guidance for 2026 despite the conflict in the Middle East. We now expect to deliver underlying operating profit of £4.7-£4.9bn and free cash flow of £3.8-£4.0bn. This builds further confidence in our mid-term targets. The actions that we have taken and investments we have made will drive significant profitable growth to the mid-term and beyond.”  

Half Year 2026 Group Results

¹ All underlying income statement commentary is provided on an organic basis unless otherwise stated. A reconciliation of alternative performance measures to their statutory equivalent is provided on pages 45 to 48
² In H1 2026, the Group re-recognised £181m UK surplus advance corporation tax (H1 2025: £277m related to the recognition of deferred tax assets on UK tax losses). This £181m has been adjusted in the calculation of the dividend per share, underlying earnings per share and return on capital. For further details, see note 5, pages 31 to 32
³ Adjusted return on capital is defined on page 48 and is abbreviated to return on capital

2026 Half Year performance summary

• Strategic delivery: The first half of 2026 has been another period of strong strategic delivery, with a significant year on year improvement across all underlying financial metrics. Driving this improvement were our strategic initiatives, including commercial optimisation and cost efficiency benefits, as well as strong operational performance. Strong financial performance was delivered despite an external environment that remains challenging. We are creating a more resilient and agile Rolls-Royce, with a diversified portfolio of three high performing businesses, a strong balance sheet and a best-in-class TCC/GM¹ ratio. We have raised our full year guidance despite the impact of the conflict in the Middle East. We continue to monitor the situation for any future direct and indirect impacts and will take further appropriate actions as necessary.
• Significant underlying operating profit and margin growth: Underlying operating profit was £2.5bn (H1 2025: £1.7bn) with an underlying operating margin of 22.5% (H1 2025: 19.1%) and improved profitability across all three divisions. Civil Aerospace delivered an underlying operating margin of 25.3% (H1 2025: 24.9%). This was driven by a strong large engine aftermarket performance, with higher long-term service agreement (LTSA) margins and time and materials performance, and contractual improvements. Defence delivered an underlying operating margin of 21.0% (H1 2025: 15.4%), reflecting our actions to support strong aftermarket performance alongside continued self-help. Power Systems reported an underlying operating margin of 20.3% (H1 2025: 15.3%), driven by strong performance in power generation, reflecting higher volumes, an improved mix and commercial optimisation, alongside higher governmental profit. Across the Group, our cost efficiency actions continue to deliver.
• Sustainable free cash flow growth: Free cash flow was £2.0bn compared to £1.6bn in the prior period. Higher free cash flow was primarily driven by stronger underlying operating profit, partly offset by lower LTSA balance growth, higher net investments, and higher cash tax costs. Civil Aerospace net LTSA balance growth net of risk and revenue sharing agreements (RRSAs) was £86m (H1 2025: £472m). This reflects 4% growth in large engine flying hours (EFH) alongside an improved EFH rate, offset by higher shop visit volumes, continued supply chain costs, and the benefits from higher LTSA margins and contract catch-ups as we drive commercial and operational improvements across the business. Net investments of £(73)m (H1 2025: £37m) included capacity expansion in both Civil Aerospace and Power Systems to support profitable growth.
• Resilient and diversified: Net cash increased to £2.1bn (FY 2025: £1.9bn). Gross debt was £2.7bn, as we repaid £1.1bn² of bonds from cash and we issued €1bn of bonds maturing in 2031 and 2036, and lease liabilities were £1.7bn. Together with cash and cash equivalents of £6.5bn, we have a robust liquidity position of £9.0bn at 30 June 2026 (FY 2025: £8.7bn). Our TCC/GM ratio continued to improve to 0.27x (H1 2025: 0.35x), a best-in-class level for the industry. The credit rating agencies continued to recognise our progress. During the period, Moody’s and Fitch upgraded our credit rating to A3 and A-, respectively, both with a stable outlook. S&P Global affirmed our BBB+ rating, moving the outlook to positive.
• Growing shareholder returns: In line with our capital framework, we will pay an interim dividend of 6.0p per share in September³. We are making good progress with the £2.5bn 2026 tranche of our share buyback programme, having completed £1.1bn by the end of June and £1.4bn to date. This forms part of our multi-year buyback programme, totalling £7bn-£9bn across 2026 to 2028.

¹Total underlying cash costs as a proportion of underlying gross margin
²Debt repaid during the period at hedged rate
³Further information on the dividend and the Company’s Dividend Reinvestment Programme can be found in Note 7 to the condensed consolidated interim financial statements, page 32

Transformation programme and strategic initiatives

Our strategic framework is founded on four strategic pillars. We continue to make strong progress against each of these pillars.

• Portfolio choices & partnerships:
  • In Civil Aerospace, we are continuing to expand our global maintenance, repair and overhaul (MRO) capacity to support long-term fleet growth and our customers. In January, Turkish Technic broke ground on a state-of-the-art engine maintenance centre at Istanbul Airport which is targeted to be operational by the end of 2027.
  • Our partnership with Airbus and Qantas is supporting the increasing demand for ultra long-haul flight. The Rolls-Royce Trent XWB-97 powers Qantas’s groundbreaking Project Sunrise programme, including the planned Sydney-London route on the Airbus A350-1000ULR, which will be the world’s longest commercial route. The programme demonstrates the durability, efficiency, and reliability of the Trent XWB-97 engine. The first non-stop Project Sunrise test flight from Australia to Europe was completed in July.
  • Our Pearl 10X engine successfully powered the first flight of Dassault’s Falcon 10X business jet, completing a key step towards entry into service. Testing will continue over the coming months, delivering key data for the final certification of the aircraft.
  • In Defence, the UK Government published its Defence Investment Plan (DIP), providing a ten-year investment framework supporting sovereign capabilities across combat, transport, submarines and autonomous. The plan pledged to invest £8.6bn into the Global Combat Air Programme (GCAP) between now and the end of the decade, offering significantly improved visibility over the funding of the programme to 2030, in addition to providing support and long-term visibility for other key future programmes such as AUKUS and UK Continuous at Sea Deterrent. We also stand to benefit from the commitments made at the recent NATO summit, including for SAAB Global Eye and MQ-4C Triton.
  • In Power Systems, we are continuing to grow our capacity to support strong growth in power generation and governmental. We are also investing in the development of the next generation engine that will offer a 20% higher power density than our current Series 4000 engine. This remains on track to be launched in 2028, and we have started full system testing in our US facility. We are strengthening our position in governmental through the continued development of the mtu Series 199 platform into a scalable powertrain platform for all major vehicle types for global land forces.
  • We are accelerating research into Advanced Modular Reactors (AMRs), supported by agreements with nuclear authorities in the UK and Japan. This activity builds on our unique nuclear capability and supports our ambition to develop a differentiated portfolio of nuclear technologies.

• Advantaged businesses & strategic initiatives:
  • In Civil Aerospace, we are continuing to improve LTSA margins across our in-production widebody engines through operational improvements and commercial optimisation, including the further successful renegotiation of onerous contracts. The improvements that we are driving across widebody and business aviation have resulted in gross contractual margin improvements of £574m in the period.
  • Our time on wing programme, which targets more than a 100% increase in durability across in-production engines by the end of 2027, remains on track with the majority of the targeted improvement now delivered. On the Trent 1000, we have begun installing the upgraded HPT blades in shop visits and in new engines. Our Phase 1 improvement delivers a 100% increase in time on wing. Our Phase 2 modification adds a further 30% improvement. Taken together, these can deliver an improvement of up to triple the time on wing for this engine, depending on operations. To date, almost 50% of the Trent 1000 TEN fleet has been fitted with improved HPT blades, bringing them to the new XE standard. The Trent 7000 also benefits from the same HPT blade improvements. Almost the entire fleet has been upgraded to date, and these improvements are performing well in service. On the Trent XWB-84, we have split the improvement programme to accelerate its delivery. Having pulled forward the planned life extensions of critical life limited parts (LLPs), we remain on track to certify the remaining LLP life extensions by the year end. On the Trent XWB-97, we have tested and proven the key pieces of technology such as the combustor and the ceramic matrix composite seal segment with the successful completion of Technology Readiness Level (TRL) 6. This included sand-ingestion tests to replicate the harshest environments these technologies will be subject to in service.
  • We have delivered significant operational improvements in the first half, including effectively eliminating aircraft on ground (AOG) in Civil Aerospace, a best-in-class performance across the industry. This benefits our airline and airframer customers and differentiates us from our competitors. This has been supported by operational improvements across our MRO network, where we have restructured our aftermarket operations to build greater operational resilience, alongside increased supply chain resilience. We are also optimising MRO costs through network efficiencies. In the first half of 2026, we increased large engine MRO output by 13%, with a 35% year on year increase in large engine refurbishments.
  • We are seeing positive commercial momentum for the Trent 1000 XE, supported by a combination of improved durability and our strong aftermarket service offering. The Trent 1000 XE has now been selected by three airlines, including LATAM Airlines, with further active campaigns underway.
  • In Defence, we are cementing our position as a global leader in autonomous propulsion, a market with significant growth potential, with several important milestones achieved. The UK DIP allocated £5bn of funding for autonomous systems, supporting the development of next-generation autonomous capabilities, including a sovereign world-leading propulsion system. In April, the U.S. Navy’s MQ‑25A Stingray, powered by our AE 3007N engines, completed its first flight, autonomously executing a digitally programmed mission plan. In Germany, Rolls-Royce is under contract to design a scalable core engine concept capable to be adapted for multiple autonomous platforms in the medium Collaborative Combat Aircraft (CCA) class.
  • In Power Systems, we continue to profitably capture strong growth in power generation, led by data centres. We are capturing stronger demand for our backup power solutions alongside growing demand for our Series 4000 gas reciprocating engines for use as a prime power source. As a result, we now expect 25% growth in power generation OE revenues to 2030 (previously: 20% to the mid-term).
  • In governmental, where we now expect 20% OE revenue growth to 2030 (previously: 20% to the mid-term), order intake was strong. In the first half of the year, we announced that we will supply 350 upgraded mtu Series 199 engines for new Boxer armoured wheeled vehicles for the German Armed Forces and other international customers, we secured an order for around 200 compact mtu PowerPacks for the Bunderswehr’s Puma armoured personnel carrier, and we signed a memorandum of understanding with Polska Grupa Zbrojeniowa S.A. to provide services to mtu engines used by the Polish Armed Forces.

• Efficiency & Simplification:
  • We started the second phase of our efficiency and simplification programme, which will drive further efficiencies and support disciplined growth as the business continues to scale up. As part of this, we are scaling up our Group Business Services (GBS) and Sales, Inventory, and Operations Planning (SIOP) activities, and driving further efficiencies from lean manufacturing and logistics, as well as from leveraging digital and AI solutions across the Group.
  • We are continuing to progress the transformation of our SIOP process to deliver more agile and improved decision making and strengthened scenario planning. We are simplifying our planning process, enabled by advanced digital planning systems, and driving greater standardisation, simplification, and integration. We have already delivered a significant reduction in cycle planning time, which has supported the improvement in fleet health and availability.
  • We are driving further efficiency improvements by simplifying operations and processes using lean manufacturing. In Civil Aerospace manufacturing, efficiency improvements and a focus on developing the culture and capability of our manufacturing teams have enabled us to deliver a 9% productivity improvement in our factories over a two-year period. In our aftermarket operations, we are also using lean improvement programmes to streamline the shop visit process, leveraging automated inspection tools and 3D-printing for tooling to reduce turnaround times and costs for Trent and Pearl engines.
  • We further improved our best-in-class TCC/GM ratio to 0.27x (H1 2025: 0.35x), evidence of the continued strengthening of our competitive advantage and resilience.

• Lower carbon & digitally enabled businesses:
  • We are building a digital thread through Rolls-Royce including engineering, MRO, and supply chain which allows us to gather dispersed data into a strategic asset for better, faster, decision making and are deploying AI tools to improve operational execution. We are continuing to deploy AI-enabled tools across our MRO network, building on the launch of AiRR (AI at Rolls-Royce) in 2025. These AI agents are being used to improve work scope prediction and shop visit scheduling, supporting our broader programme to reduce turnaround times and shop visit costs over time.
  • In Civil Aerospace, the Trent XWB-84 EP engine entered into service last year with Delta Air Lines, building on the Trent XWB-84, which was already the world’s most efficient in-service large engine. The Trent XWB‑84 EP engine is delivering a 1.8% specific fuel efficiency improvement, significantly above the planned target of 1%. For an airline, this fuel burn improvement can represent a saving of around $450,000 per aircraft per year.
  • Our Pearl 700 engines powered the Gulfstream G800’s first flight using 100% sustainable aviation fuel (SAF). The test demonstrated a significant reduction in particulates that contribute to contrail formation when using SAF.
  • In Power Systems, demand for battery energy storage systems (BESS) to support grid stability and renewable energy integration remains strong. In March, we began construction on a large 86MWh energy storage project in Falkirk, Scotland for Voltaria Helios Energy Storage, which will connect to the grid later this year. In June, we signed contracts with Sunly for four large-scale BESS in Latvia with a total capacity of 490MWh, which further strengthens our position in the Baltic states.
  • Rolls-Royce SMR was selected by Videberg Kraft to supply three SMRs in Sweden. This underscores Rolls‑Royce SMR’s position as Europe’s leading SMR technology. Rolls-Royce SMR is the only SMR company with multiple contractual commitments in Europe and is well placed to become a global market leader. Rolls‑Royce SMR’s contracts with Great British Energy – Nuclear (GBE-N) in the UK and CEZ Group in the Czech Republic have now entered the execution phase and are now generating revenues and profits for Rolls‑Royce SMR.

These strategic initiatives are continuing to expand the earnings and cash potential of the business. 

Outlook and 2026 Guidance

A strong first half gives us confidence to raise our full year 2026 guidance, despite an uncertain external environment. This reflects continued execution of our strategic initiatives, including commercial optimisation and cost efficiencies.

Underlying operating profit guidance for full year 2026 now stands at £4.7bn-£4.9bn compared to £4.0bn-£4.2bn previously.

The increase in guidance is driven by higher LTSA margins and an increased level of contract catch-ups in Civil Aerospace, stronger profitability in power generation in Power Systems, and stronger aftermarket profitability in Defence.

We expect a lower contribution from contractual margin improvements in Civil Aerospace in the second half of the year (H1 2026: £497m).

Free cash flow guidance for the full year 2026 now stands at £3.8bn-£4.0bn compared to £3.6bn-£3.8bn previously. As guided in February, our free cash flow guidance for full year 2026 includes a £150-200m cash impact related to the aerospace supply chain. We continue to expect this cash impact to be gone by the mid-term, with a reduced outflow in 2027.

In Civil Aerospace, we now expect large EFH towards the lower end of the range of 115%-120% of 2019 levels. We continue to expect 550-600 total OE deliveries and 1,480-1,550 total shop visits. Our 2026 free cash flow guidance is based on a lower Civil Aerospace net LTSA balance growth compared to 2025 (£572m), due to higher shop visit volumes, increased LTSA margins and contract catch-ups. Additional details are included in the results presentation and supplementary data slides.

Results meeting and webcast

Our results presentation will be held at UBS, 5 Broadgate, London EC2M 2QS and webcast live at 09:00 (BST) today. Attendance is by pre-registration only. Downloadable materials will also be available on the Investor Relations section of the Rolls-Royce website: https://www.rolls-royce.com/investors/results-reports-and-presentations/financial-results.aspx

To register for the webcast, including Q&A participation, please visit the following link: Rolls-Royce 2026 Half Year Results - webinar.net

Please use this same link to access the webcast replay which will be made available shortly after the event concludes. Photographs and broadcast-standard video are available at www.rolls-royce.com

Enquiries:

For retail shareholder queries, please contact [email protected].

Individual holders of ordinary shares can contact our Registrar, Equiniti for support with their shareholding. Contact details and FAQs are available on our website, www.rolls-royce.com/investors/investor-contacts.

The person responsible for arranging the release of this announcement on behalf of Rolls-Royce Holdings plc is Claire-Marie O'Grady, Chief Governance Officer.

This results announcement contains forward-looking statements. Any statements that express forecasts, expectations and projections are not guarantees of future performance and will not be updated. By their nature, these statements involve risk and uncertainty, and a number of factors could cause material differences to the actual results or developments. This report is intended to provide information to shareholders, is not designed to be relied upon by any other party, or for any other purpose and Rolls-Royce Holdings plc and its directors accept no liability to any other person other than under English law.

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