Rolls-Royce Holdings (LSE:RR.) reported underlying operating profit of £2.5bn for the first half of 2026, up 46% from £1.7bn a year earlier.
The underlying operating margin rose to 22.5% from 19.1%, with Civil Aerospace, Defence and Power Systems all delivering improved profitability. Free cash flow reached £2bn, up from £1.6bn in the first half of 2025, driven by higher operating profit despite lower long-term service agreement (LTSA) balance growth and increased investment.
Net cash stood at £2.1bn at the end of June, up from £1.9bn at the end of 2025, with liquidity of £9bn and a TCC/gross margin ratio improving to 0.27x from 0.35x.
Civil Aerospace's margin reached 25.3%, helped by stronger large engine aftermarket performance and £574m of gross contractual margin improvements during the period.
"Our transformation continues to deliver, and we are demonstrating that Rolls-Royce is now a very different company to that of the past", chief executive Tufan Erginbilgic said.
Rolls-Royce raised full-year 2026 guidance to underlying operating profit of £4.7bn-£4.9bn, up from £4bn-£4.2bn previously, and free cash flow of £3.8bn-£4bn, up from £3.6bn-£3.8bn.
The company cited higher LTSA margins and contract catch-ups in Civil Aerospace, stronger power generation profitability, and improved Defence aftermarket performance as drivers of the upgrade.
Rolls-Royce will pay an interim dividend of 6.0p per share in September, and has completed £1.4bn of its planned £2.5bn 2026 share buyback tranche to date.
News Intelligence what this means for the company
Rolls-Royce lifted full-year 2026 profit guidance to £4.7bn–£4.9bn (from £4bn–£4.2bn) and free cash flow to £3.8bn–£4bn (from £3.6bn–£3.8bn) after first-half underlying operating profit jumped 46% to £2.5bn, with all three divisions posting margin expansion. The upgrade reflects sustained momentum in Civil Aerospace aftermarket and contractual margin catch-ups, plus improved Defence and Power Systems performance—signalling the company's multi-year transformation is translating into durable earnings and cash generation.
The 46% profit jump and margin expansion across all divisions, combined with £2bn first-half free cash flow and a strengthened net cash position of £2.1bn, materially de-risk the turnaround narrative. Guidance raises of 17–19% on profit and 5–6% on cash flow, anchored to concrete H1 delivery, suggest the company is moving from recovery story to sustainable earnings growth—though execution risk on the elevated full-year targets remains.
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