Key facts
- Rolls-Royce's first-half operating profit rose 46% to £2.5bn.
- The company increased its full-year operating profit guidance to £4.7bn-£4.9bn.
- Defence orders totalled £2.4bn, with a backlog of £17.5bn.
- An interim dividend of 6p per share will be paid.
- Rolls-Royce has completed £1.4bn of its £2.5bn share buyback programme.
Rolls-Royce shares surged on Thursday after the company announced a significant increase in its profit targets, driven by a 46% rise in operating profits during the first half of the year. The engineering firm's performance was bolstered by increased defence spending and a successful overhaul of its operations.
Under Chief Executive Tufan Erginbilgic, who has implemented a sweeping transformation, Rolls-Royce reported £2.5bn in underlying operating profit for the first half, exceeding expectations. The company now anticipates full-year operating profits to reach between £4.7bn and £4.9bn, a notable increase from its previous guidance of £4bn to £4.2bn, and surpassing analyst forecasts of around £4.2bn.
Erginbilgic highlighted the company's resilience and agility, stating, "We are demonstrating that Rolls-Royce is now a very different company to that of the past." He noted improvements in the civil aerospace division and a strengthened position in defence.
Statutory profit for the first half stood at approximately £1.6bn, a decrease from the previous year attributed to disposals and currency fluctuations. The company declared an interim dividend of 6p per share, with basic earnings per share reported at around 19p.
Rolls-Royce's stock has seen substantial growth over the past year, rising over 42%. The company's involvement in small modular reactor deals has also expanded its influence in the nuclear energy sector.
In the defence sector, Rolls-Royce secured £2.4bn in new orders, contributing to a backlog of £17.5bn, equivalent to over three years of revenue. Deals include supplying engines for Turkish jets and frigates for the Australian navy. Trading cash flow in defence has also improved.
Emily Sawicz, an analyst at RSM UK, commented on the strong performance across all divisions, particularly noting defence orders from NATO members like the UK and Canada, which are expected to encourage further investment and support the UK supply chain amidst increased defence spending plans.