Rolls-Royce raises profit and cash flow outlook after strong H1

British aero-engineer Rolls-Royce raised its full-year outlook for both operating profit and free cash flow on Thursday (Jul 31) after it navigated supply chain challenges and tariffs to deliver a strong first half.

The company, whose engines power Airbus’s widebody planes and some Boeing 787s, increased the top end of its operating profit guidance by £300 million (S$515.2 million) to £3.2 billion and its free cash flow by £200 million to £3.1 billion.

Chief executive Tufan Erginbilgic, who has turned around Rolls-Royce since joining at the start of 2023, said his multi-year transformation was continuing to deliver.

“Our actions led to strong first half year results, despite the challenges of the supply chain and tariffs,” he said.

He said Rolls had improved the time its engines spend “on wing”, that is powering planes before needing maintenance – a key demand from its airline customers – and had improved the profitability of its maintenance services.

Its power systems business had also grown by winning business from data centre and government customers, he said.

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Shares in Rolls have soared since Erginbilgic joined, reaching a new all-time closing high of 1,010 pence earlier this month.

They are up 74 per cent year-to-date against a 12 per cent rise in the FTSE 100.

In its civil aerospace business, Rolls said it had renegotiated all of its original equipment contacts and its most onerous aftermarket contracts, boosting operating profit and cash flow in the mid-term.

It is increasing the durability of its large engines to deliver a more than 80 per cent improvement in time-on-wing for its modern Trent engines by 2027.

The company, which also has a defence business, reported underlying operating profit of £1.7 billion for the first half, against £1.1 billion a year earlier, with an operating margin of 19.1 per cent, up from 14.0 per cent. REUTERS