This announcement contains inside information
		ROLLS-ROYCE HOLDINGS PLC - 2026 Half Year Results	30 July 2026
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

	Underlying H1 2026 1	Underlying H1 2025 1	Statutory H1 2026	Statutory H1 2025
£ million
Revenue	11,279	9,057	11,448	9,490
Operating profit	2,534	1,733	2,418	2,074
Operating margin %	22.5%	19.1%	21.1%	21.9%
Profit before taxation	2,495	1,689	1,931	4,841
Basic earnings per share (pence) 2	22.17	15.74	19.32	52.38
Free cash flow	1,964	1,582
Return on capital (%) 2, 3	22.0%	16.9%
Net cash flow from operating activities			2,570	2,018
			30 Jun 2026	31 Dec 2025
Net cash			2,136	1,895

 

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.
1	Total underlying cash costs as a proportion of underlying gross margin
2	Debt repaid during the period at hedged rate
3	Further 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.

2026 financial guidance	Upgraded	Previous
Underlying operating profit	£4.7bn-£4.9bn	£4.0bn-£4.2bn
Free cash flow	£3.8bn-£4.0bn	£3.6bn-£3.8bn

 

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.

Half Year 2026 financial performance by division

£ million	Underlying revenue	Organic change 1	Underlying operating profit/(loss)	Organic change 1	Underlying operating margin	Organic margin change 1
Civil Aerospace	6,186	29%	1,567	31%	25.3%	0.5pt
Defence	2,484	17%	522	57%	21.0%	5.4pt
Power Systems	2,604	28%	528	72%	20.3%	5.3pt
All Other Businesses 2	5	(17)%	(30)	(41)%	nm3	nm3
Corporate/eliminations	-	nm3	(53)	41%	nm3	nm3
Total	11,279	26%	2,534	46%	22.5%	3.1pt

 

Trading cash flow

£ million			H1 2026	H1 2025
Civil Aerospace			1,458	1,111
Defence			615	327
Power Systems			507	425
All Other Businesses 2			(12)	17
Corporate/eliminations			(50)	(33)
Total trading cash flow			2,518	1,847
Underlying operating profit charge exceeded by contributions to defined benefit schemes			(29)	(6)
Taxation			(525)	(259)
Total free cash flow			1,964	1,582
1	Organic change is the measure of change at constant translational currency applying full year 2025 average rates to 2025 and 2026 and excludes M&A and business closures. All underlying income statement commentary is provided on an organic basis unless otherwise stated
2	All Other Businesses comprises the financial results of the UK Civil Nuclear business and the Group's share of the financial results of Rolls-Royce SMR Limited
3	nm is defined as not meaningful

 

Civil Aerospace

H1 2026 key Civil Aerospace operational metrics:	Large engine	Business aviation/ regional	Total	Change
OE deliveries	157	122	279	+42
LTSA engine flying hours (millions)	8.4	1.6	10.0	+0.4
Total LTSA shop visits	556	156	712	+16
…of which major shop visits	294	140	434	+28

 

Higher Civil Aerospace underlying operating profit reflected stronger large engine aftermarket performance, with higher LTSA margins and time and materials performance, alongside a larger contribution from contractual margin improvements.

In the first half of 2026, large EFH rose by 4% versus the prior period to 113% of 2019 levels, driven primarily by new aircraft deliveries. Business aviation and regional EFH rose by 9% in the period.

Demand for new widebody aircraft remains strong. A total of 254 large engines were ordered in the period (H1 2025: 349) with a gross book-to-bill of 1.6x (H1 2025: 2.9x). Significant new orders included 40 Trent XWB-97 engines for Atlas Air Worldwide to power 20 Airbus A350F freighter aircraft, 30 Trent XWB-84 EP and 32 Trent 7000 engines for Delta Air Lines, 40 Trent 7000 engines for SAS, and orders for Trent 1000 XE engines for eight Boeing 787 aircraft, including for LATAM Airlines. As a result of strong order inflow in the period, our large engine order book stood at 2,266 engines at the end of June 2026 (H1 2025: 2,056).

Total OE deliveries of 279 engines were 18% higher than the prior period (H1 2025: 237), comprising 122 business aviation deliveries (H1 2025: 115) and 157 total large engine deliveries (H1 2025: 122). Shop visits increased by 2% versus the prior period to 712 (H1 2025: 696); of these 294 were large engine major shop visits (H1 2025: 217).

Underlying revenue of £6.2bn increased 29%, driven by higher OE deliveries and shop visit volumes, alongside stronger commercial optimisation. Underlying OE revenue grew by 35% in the period to £2.0bn and services revenue grew by 26% to £4.2bn. LTSA revenue catch-ups were £356m (H1 2025: £126m).

Underlying operating profit was £1.6bn (25.3% margin) versus £1.2bn in H1 2025 (24.9% margin). The significant increase in underlying operating profit was driven by stronger large engine aftermarket performance, including higher LTSA margins and shop visit volumes, a larger contribution from contractual margin improvements, higher time and materials profit, and a stronger business aviation performance.

Our efforts to improve the profitability of our aftermarket contracts supported gross contractual margin improvements with a benefit in the period of £574m. This was driven by the commercial and operational improvements that we are making across widebody and business aviation, alongside the successful renegotiation of onerous contracts. These benefits were partially offset by £77m of additional charges related to the impact of higher product costs associated with continued supply chain challenges. As a result, net contractual and operational improvements were £497m (H1 2025: £288m), comprising contract catch-ups of £372m (H1 2025: £107m) and onerous provision releases of £125m (H1 2025: £181m).

Trading cash flow of £1.5bn compared to £1.1bn in the prior period. Higher trading cash flow was primarily driven by stronger underlying operating profit alongside an improved working capital performance, partly offset by a lower LTSA balance growth.

Civil Aerospace net LTSA balance growth net of risk and revenue sharing agreements (RRSAs) of £86m compared to £472m in the prior period. Higher LTSA invoiced flying hour receipts of £3.4bn (H1 2025: £3.0bn) reflected continued EFH growth and an improved EFH rate. This was partly offset by higher LTSA revenues, reflecting higher shop visit volumes, including significantly more large engine refurbishments, and the benefits from higher LTSA margins and contract catch-ups as we drive commercial and operational improvements across the business.

Defence

Higher underlying operating profit was driven by our actions to support a stronger aftermarket performance alongside continued self-help.

Demand remains high, with an order intake of £2.4bn and a book-to-bill ratio of 1.0x. Order backlog now stands at £17.5bn, equivalent to more than three years of revenue, with order cover approaching 90% for the remainder of 2026.

Underlying revenues of £2.5bn grew by 17% compared to the prior period, with OE and services revenue growth of 18% and 16%, respectively. All sectors delivered strong revenue growth including combat (12%), submarines (14%), and transport (14%).

Key milestones in the period included an award in March to the EUROJET Consortium, in which Rolls-Royce is a major partner, to provide EJ200 engines that will power Türkiye's new fleet of 20 Eurofighter Typhoons. In April, our MT30 marine gas turbine was selected to power up to 11 of the Australian Navy's new Japanese-built Mogami-class fleet of general-purpose frigates, helping to enhance undersea warfare and air defence capabilities. Engine testing for the U.S. Army's MV‑75 Cheyenne is progressing well, and we are on track to deliver the first AE 1107 flight test engines later this year. We also completed key altitude and operating tests on the F-130, which will re-engine the U.S. Air Force's B-52 fleet, and are moving ahead with the next stages of systems integration and dual-pod testing.

Underlying operating profit was £522m (21.0% margin) compared to £342m (15.4% margin) in the prior period. Higher underlying operating profit reflects our actions to support a stronger aftermarket performance across transport and combat, including reducing shop visit costs and driving manufacturing efficiencies, as well as a strong contribution from profitable international sales, and an increase in flying hours. This was in addition to continued self-help benefits, notably cost efficiencies, and submarines growth.

Trading cash flow was £615m compared to £327m in the prior period, driven by higher underlying operating profit alongside an improved working capital performance, which included increased customer prepayments in the period.

 

Power Systems

Higher underlying operating profit reflected stronger performance in power generation and governmental, as we captured volume growth with an improved mix, and delivered commercial optimisation benefits.  

Order intake was £4.6bn, more than a 50% increase compared to the prior period, with a book-to-bill ratio of 1.8x. OE order coverage remains strong at around 100% for 2026 and more than 50% for 2027, with growing visibility of orders to the mid-term and beyond supported by our framework agreements with data centre customers. Power generation order intake rose by 55%, reflecting strong demand for backup and prime power solutions for data centres. Governmental order intake rose by 50%.

Underlying revenue increased by 28% compared to the prior period to £2.6bn. Power generation underlying revenue growth was 41%, which included strong data centre growth. Governmental underlying revenue growth was 25%, driven by both land and naval. Underlying OE revenue grew by 33% to £1.8bn. Underlying services revenue grew by 17% to £780m.

Underlying operating profit grew by 72% to £528m with underlying operating margin improving by 5.3pts to 20.3% (H1 2025: 15.3%). The increase in underlying operating profit reflected stronger performance in power generation, driven by data centres, as we captured volume growth with an improved customer and product mix alongside commercial optimisation benefits. Governmental performance was also stronger.

Trading cash flow was £507m compared to £425m in the prior period, driven by higher underlying operating profit, partly offset by increased investments and working capital to support disciplined business growth.

Statutory and underlying Group financial performance

	H1 2026					H1 2025
£ million	Statutory	Impact of hedge book 1	Impact of acquisition accounting	Impact of other non-underlying items	Underlying	Underlying
Revenue	11,448	(169)	-	-	11,279	9,057
Gross profit	3,427	(38)	6	2	3,397	2,572
Operating profit	2,418	(37)	8	145	2,534	1,733
Net financing (costs)/income	(487)	417	-	31	(39)	(44)
Taxation 2	(316)	(100)	(2)	(43)	(461)	(93)
Profit for the period	1,615	280	6	133	2,034	1,596
Basic earnings per share (pence) 2	19.32				22.17	15.74

Revenue: Underlying revenue of £11.3bn was 26% higher than the prior period, reflecting strong growth across all divisions. Statutory revenue of £11.4bn was 21% higher compared with the prior period. The difference between statutory and underlying revenue is driven by statutory revenue being measured at average prevailing exchange rates (H1 2026: GBP:USD 1.35; H1 2025: GBP:USD 1.30) and underlying revenue being measured at the hedge book achieved rate during the period (H1 2026: GBP:USD 1.38; H1 2025: GBP:USD 1.44).

Operating profit: Underlying operating profit of £2.5bn (22.5% margin) compared to £1.7bn (19.1% margin) in the prior period, with improved profitability across all three divisions. The largest increase in underlying operating profit was in Civil Aerospace, driven by a strong large engine aftermarket performance, with higher LTSA margins and time and materials performance, and contractual margin improvements. Power Systems also delivered a significant increase, reflecting strong performance in power generation, driven by higher volumes, an improved mix and commercial optimisation, alongside higher governmental profit. Higher profit in Defence reflected our actions to support a strong aftermarket performance in combat and transport alongside continued self-help. Statutory operating profit was £2.4bn, compared to underlying operating profit of £2.5bn. The £116m lower statutory operating profit is primarily due to a £(117)m pension past service charge, £(28)m transformation and restructuring charges, £(8)m amortisation of intangible assets from previous acquisitions, partly offset by £37m positive impact from currency hedges. These items have been adjusted in arriving at underlying operating profit.

Net financing (costs)/income: Underlying net financing costs of £(39)m, comprising £112m interest receivable, £(103)m interest payable and £(48)m of other financing charges. Statutory net financing costs of £(487)m included net fair value losses on derivative contracts of £(250)m, net foreign exchange losses of £(167)m, net interest payable of £(5)m, and £(65)m of other financing charges, costs of undrawn facilities and pension scheme financing.

Taxation: Underlying tax charge of £(461)m (H1 2025: £(93)m) reflects an overall tax charge on profits of Group companies and a tax charge of £(23)m relating to the recognition of a deferred tax liability for withholding tax on unremitted earnings from overseas subsidiaries. This is partly offset by a tax credit of £181m relating to the re-recognition of previously derecognised deferred tax asset relating to UK surplus advance corporation tax. These are reflected in the statutory tax charge of £(316)m (H1 2025: tax charge £(433)m), which also includes a £9m tax credit relating to other non-underlying items.

Profit for the period: Underlying profit for the period of £2.0bn was £419m higher than statutory profit for the period with the main drivers of this being set out above. Statutory profit for the period of £1.6bn (H1 2025: £4.4bn) was £2.8bn lower than the prior period primarily due to the impact of exchange rate movements on our hedge book and the disposal of businesses in the prior period. For statutory reporting purposes, we are required to record the hedge book at fair value using the prevailing exchange rate, this resulted in a £(250)m net financing cost in the period (H1 2025: net financing gain of £1.6bn). The movement in foreign exchange rates also resulted in a foreign exchange loss of £(167)m in the period (H1 2025: gain of £529m). The prior period also benefited from a £679m gain on disposal of business.

 

1	Reflecting the impact of measuring revenue and costs at the average exchange rate during the period and the valuation of assets and liabilities using the period end exchange rate rather than the rate achieved on settled foreign exchange contracts in the period or the rate expected to be achieved by the use of the hedge book
2	In H1 2026, the underlying profit attributable to ordinary shareholders has been adjusted for the one-off impact of £181m related to the re-recognition of UK surplus advance corporation tax (H1 2025: £277m related to the recognition of deferred tax assets on UK tax losses), see note 5, pages 31 to 32 for further details

 

Free cash flow

	H1 2026					H1 2025
£ million	Cash flow	Impact of hedge book	Impact of acquisition accounting	Impact of other non-underlying items	Funds flow	Funds flow
Operating profit	2,418	(37)	8	145	2,534	1,733
Depreciation, amortisation and impairment	434	-	(8)	-	426	433
Movement in provisions	(130)	(31)	-	2	(159)	(294)
Movement in Civil Aerospace LTSA balance	56	56	-	-	112	441
Movement in RRSA prepayments for parts	(17)	(9)	-	-	(26)	31
Movement in cost to obtain contracts	(3)	(1)	-	-	(4)	(48)
Settlement of excess derivatives	(27)	-	-	-	(27)	(116)
Interest received	110	-	-	-	110	150
Other operating cash flows 1	172	-	-	(117)	55	64
Operating cash flow before working capital and income tax	3,013	(22)	-	30	3,021	2,394
Working capital 2	114	(38)	-	(11)	65	(22)
Cash flows on other financial assets and liabilities held for operating purposes	(32)	53	-	-	21	(31)
Income tax	(525)	-	-	-	(525)	(259)
Cash from operating activities	2,570	(7)	-	19	2,582	2,082
Capital element of lease payments	(139)	7	-	-	(132)	(78)
Capital expenditure	(362)	-	-	-	(362)	(349)
Cash received on maturity of share-based payment schemes	-	-	-	-	-	38
Investments	(5)	-	-	-	(5)	31
Interest paid	(117)	-	-	-	(117)	(136)
Other	17	-	-	(19)	(2)	(6)
Free cash flow	1,964	-	-	-	1,964	1,582

 

Free cash flow in the period was £2.0bn, £382m higher than the prior period driven by:

Underlying operating profit of £2.5bn was £801m higher than the prior period.

Movement in provisions of £(159)m was primarily driven by a net release of onerous provisions.

Movement in Civil Aerospace LTSA balance was £112m (H1 2025: £441m), driven by continued EFH growth and an improved EFH rate, partly 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 widebody and business aviation. Catch-ups were £(356)m in H1 2026 compared with £(126)m in the prior period.

Movement in RRSA prepayments for parts of £(26)m (H1 2025: £31m) is driven by growth in income received from customers (based on EFH flown) where the partner receives a share in advance of them providing goods and services to the Group.

Working capital inflow of £65m, compared to an outflow of £(22)m in the prior period. This reflected the continued benefits of our working capital initiatives, and as we supported strong growth across the Group. A net inflow of £556m from receivables, payables and contract liabilities reflected sales volume growth and the receipt of higher advanced payments across the divisions. This was partly offset by a £(491)m increase in inventory to support volume growth in the second half of the year.

Income tax of £(525)m was higher than the prior period of £(259)m due to increased profits and timing of payments.

Capital expenditure of £(362)m includes £(237)m of property, plant and equipment additions and £(153)m of intangibles additions. The combined additions were higher than the prior period (H1 2025: £(349)m) and included capacity expansion in both Civil Aerospace and Power Systems to support profitable growth.

 

1	Other operating cash flows includes profit/(loss) on disposal, share of results and dividends received from joint ventures and associates, flows relating to our defined benefit post-retirement schemes, and share based payments
2	Working capital includes inventory, trade and other receivables and payables, and contract assets and liabilities (excluding Civil Aerospace LTSA balances, prepayment to RRSAs and costs to obtain contracts)

Balance Sheet

£ million	30 June 2026	31 December 2025	Change
Intangible assets	4,624	4,598	26
Property, plant and equipment	4,148	4,013	135
Right-of-use assets	766	759	7
Joint ventures and associates	1,252	1,289	(37)
Civil Aerospace LTSA 1	(10,435)	(10,397)	(38)
RRSA prepayments for parts 1	1,821	1,771	50
Costs to obtain contracts 1	181	178	3
Working capital 1	(2,489)	(2,216)	(273)
Provisions	(1,455)	(1,557)	102
Net cash 2	2,136	1,895	241
Net financial assets and liabilities 2	(255)	(38)	(217)
Net post-retirement scheme deficits	(727)	(606)	(121)
Taxation	3,315	3,068	247
Assets and liabilities held for sale 3	-	(4)	4
Net assets	2,882	2,753	129
US$ hedge book (US$bn)	22	21

 

Key drivers of balance sheet movements were:

Civil Aerospace LTSA: The £(38)m movement in the net liability balance was mainly driven by an increase in invoiced LTSA receipts exceeding revenue recognised in the period.

RRSA prepayments for parts: The £50m increase corresponds to the increase seen in the Civil Aerospace LTSA balance noted above. RRSA prepayments typically move in line with the Civil Aerospace LTSA balance as the RRSA prepayment represents amounts that we have paid to Risk and Revenue Share Partners for the parts that they will ultimately provide in support of our contracts.

Working capital: The net working capital position of £(2.5)bn increased by £(273)m compared to the prior period. The movement was mainly due to an increase in net contract liabilities of £(717)m, partly offset by a £423m increase in inventory reflecting higher sales volumes and a £21m decrease in net payables.

Provisions: The £102m net reduction in provisions was due to onerous provision reversals and utilisation being greater than onerous provision charges in the period, supported by continued efforts to renegotiate onerous contracts.

Net cash: Increased by £241m to £2.1bn, with a free cash inflow of £2bn, offset by the repayment of loan notes in the period in line with their maturity dates, with €750m repaid in February 2026 and £375m repaid in June 2026. Net cash included £(1.7)bn of lease liabilities (FY 2025: £(1.5)bn). Our liquidity position is strong, standing at £9.0bn and includes cash and cash equivalents of £6.5bn and undrawn facilities of £2.5bn.

Net financial assets and liabilities: A £217m increase in the net financial liabilities primarily driven by fair value losses on foreign exchange and commodity contracts due to the impact on the movement in GBP:USD exchange rates.  

Net post-retirement scheme deficits: An increase of £121m largely related to the Rolls-Royce UK Pension Fund. In 2025, we entered into a Buy-in transaction, and in H1 2026 additional benefits were granted to members. The Buy-in was undertaken in anticipation of a full Buy-out, which was completed in July.

Taxation: The net tax asset increased by £247m to £3.3bn. The increase is driven by the re-recognition of £181m deferred tax asset related to UK surplus advance corporation tax previously not recognised and a £267m reduction in the net current tax creditor primarily due to the timing of tax payments. This is partly offset by the £(165)m reduction in deferred tax assets, driven by the utilisation of UK tax losses, utilisation of UK surplus advance corporation tax, and reactivation of previously disallowed interest.

1	The total of these lines represent inventory, trade receivables and payables, contract assets and liabilities and other assets and liabilities in the statutory balance sheet
2	Net cash includes £(37)m (2025: £(77)m) of the fair value of derivatives included in fair value hedges and the element of fair value relating to exchange differences on the underlying principal of derivatives in cash flow hedges
3	Assets and liabilities held for sale relate to the naval handling business

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:

https://app.webinar.net/YEPKlJLdgyL

 

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:

 

Investors:			Media:
Jeremy Bragg Ruchi Malaiya	+44 7795 840875 +44 7900 189184		Richard Wray	+44 7810 850055

 

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.

 

LSE: RR.; ADR: RYCEY; LEI: 213800EC7997ZBLZJH69

 

Condensed Consolidated Interim Financial Statements

Condensed consolidated income statement

For the half-year ended 30 June 2026

				Half-year to  30 June 2026			Half-year to  30 June 2025
			Notes		£m		£m
Revenue			2		11,448		9,490
Cost of sales 1, 2					(8,021)		(6,563)
Gross profit			2		3,427		2,927
Commercial and administrative costs			2		(797)		(631)
Research and development costs 2			2, 3		(228)		(246)
Share of results of joint ventures and associates					16		24
Operating profit					2,418		2,074
Gain arising on disposal of business 3					-		679
Profit before financing and taxation					2,418		2,753
Financing income			4		197		2,342
Financing costs			4		(684)		(254)
Net financing (costs)/income 4					(487)		2,088
Profit before taxation					1,931		4,841
Taxation			5		(316)		(433)
Profit for the period					1,615		4,408
Attributable to:
Ordinary shareholders					1,613		4,416
Non-controlling interests (NCI)					2		(8)
Profit for the period					1,615		4,408
Other comprehensive income/(expense) (OCI)					20		(330)
Total comprehensive income for the period					1,635		4,078
Earnings per ordinary share attributable to ordinary shareholders:			6
Basic					19.32p		52.38p
Diluted					19.28p		52.15p

¹   Cost of sales includes a net charge for expected credit losses (ECLs) of £5m (30 June 2025: net release of £13m). Further detail can be found in note 12

²  In the period ended 30 June 2025, an exceptional impairment reversal was included within both cost of sales, £176m, and research and development, £9m. Further details can be found in note 2

³  In the period ended 30 June 2025, an exceptional gain on disposal was recognised as a result of the deconsolidation of Rolls-Royce SMR Limited

⁴  Included within net financing are fair value changes on derivative contracts. Further details can be found in notes 2, 4 and 16

Condensed consolidated statement of comprehensive income

For the half-year ended 30 June 2026

		Half-year to 30 June 2026	Half-year to 30 June 2025
	Notes	£m	£m
Profit for the period		1,615	4,408
Other comprehensive (expense)/income (OCI)
Actuarial movements on post-retirement schemes	18	(21)	(20)
Revaluation to fair value of other investments		(1)	1
Share of OCI of joint ventures and associates		-	(1)
Related tax movements		6	9
Items that will not be reclassified to profit or loss		(16)	(11)
Foreign exchange translation differences on foreign operations		44	(296)
NCI disposed through disposal of business		-	(23)
Movement on fair values credited/(charged) to cash flow hedge reserve		5	(58)
Reclassified to income statement from cash flow hedge reserve		(11)	51
Share of OCI of joint ventures and associates		(1)	5
Related tax movements		(1)	2
Items that will be reclassified to profit or loss		36	(319)
Total other comprehensive income/(expense)		20	(330)
Total comprehensive income for the period		1,635	4,078
Attributable to:
Ordinary shareholders		1,633	4,109
NCI		2	(31)
Total comprehensive income for the period		1,635	4,078

 

Condensed consolidated balance sheet

At 30 June 2026

		30 June  2026	31 December 2025
	Notes	£m	£m
ASSETS
Goodwill	8	1,024	1,028
Intangible assets	9	3,600	3,570
Property, plant and equipment	10	4,148	4,013
Right-of-use assets	11	766	759
Investments		1,252	1,289
Other financial assets	16	304	523
Deferred tax assets		3,425	3,460
Post-retirement scheme surpluses	18	143	286
Non-current assets		14,662	14,928
Inventories		6,151	5,728
Trade receivables and other assets	12	9,504	8,946
Contract assets	13	1,821	1,897
Taxation recoverable		178	75
Other financial assets	16	195	282
Cash and cash equivalents		6,484	6,244
Current assets		24,333	23,172
Assets held for sale	21	11	15
TOTAL ASSETS		39,006	38,115
LIABILITIES
Borrowings and lease liabilities	14	(452)	(1,426)
Other financial liabilities	16	(447)	(293)
Trade payables and other liabilities	15	(9,461)	(8,863)
Contract liabilities	13	(8,618)	(7,832)
Current tax liabilities		(202)	(366)
Provisions for liabilities and charges	17	(467)	(507)
Current liabilities		(19,647)	(19,287)
Borrowings and lease liabilities	14	(3,859)	(2,846)
Other financial liabilities	16	(344)	(627)
Trade payables and other liabilities	15	(1,664)	(1,778)
Contract liabilities	13	(8,655)	(8,762)
Deferred tax liabilities		(86)	(101)
Provisions for liabilities and charges	17	(988)	(1,050)
Post-retirement scheme deficits	18	(870)	(892)
Non-current liabilities		(16,466)	(16,056)
Liabilities associated with assets held for sale	21	(11)	(19)
TOTAL LIABILITIES		(36,124)	(35,362)
NET ASSETS		2,882	2,753
EQUITY
Called-up share capital		1,671	1,689
Capital redemption reserve		23	5
Cash flow hedge reserve		-	7
Translation reserve		461	418
Retained earnings		698	607
Equity attributable to ordinary shareholders		2,853	2,726
Non-controlling interest (NCI)		29	27
TOTAL EQUITY		2,882	2,753

Condensed consolidated cash flow statement

For the half-year ended 30 June 2026

	Notes	Half-year to 30 June 2026 £m	Half-year to 30 June 2025 £m
Reconciliation of cash flows from operating activities
Operating profit		2,418	2,074
(Profit)/loss on disposal of property, plant and equipment		(16)	4
Profit on disposal of intangible assets		(1)	-
Share of results of joint ventures and associates		(16)	(24)
Dividends received from joint ventures and associates		74	30
Amortisation and impairment of intangible assets	9	110	111
Depreciation and impairment of property, plant and equipment	10	184	132
Depreciation and impairment of right-of-use assets	11	140	13
Decrease in provisions		(130)	(395)
Increase in inventories		(491)	(608)
Movement in trade receivables/payables and other assets/liabilities		(130)	300
Movement in contract assets/liabilities		771	972
Cash flows on other financial assets and liabilities held for operating purposes 1		(32)	(389)
Cash flows on settlement of excess derivative contracts 2		(27)	(116)
Interest received		110	150
Net defined benefit post-retirement cost recognised in profit before financing	18	136	33
Cash funding of defined benefit post-retirement schemes	18	(48)	(39)
Share-based payments		43	60
Net cash inflow from operating activities before taxation		3,095	2,308
Taxation paid		(525)	(290)
Net cash inflow from operating activities		2,570	2,018
Cash flows from investing activities
Additions of intangible assets	9	(153)	(167)
Disposals of intangible assets		1	1
Purchases of property, plant and equipment		(237)	(202)
Disposals of property, plant and equipment		27	6
Disposals of right-of-use assets		-	13
Disposal of businesses (including cash flows on disposals in prior periods)		-	(85)
Movement in investments in joint ventures and associates		(5)	(4)
Net cash outflow from investing activities		(367)	(438)
Cash flows from financing activities
Repayment of loans		(1,032)	(176)
Proceeds from increase in loans		864	176
Settlement of swaps hedging fixed rate borrowings		(25)	-
Capital element of lease payments		(139)	(91)
Net cash outflow from decrease in borrowings and lease liabilities		(332)	(91)
Interest paid		(79)	(96)
Interest element of lease payments		(37)	(38)
Fees paid on undrawn facilities		(1)	(2)
Cash received on maturity of share-based payment schemes		-	38
Transactions with NCI 3		-	35
Redemption of C Shares		-	(1)
Share buyback		(1,097)	(380)
Dividends paid	7	(417)	(507)
Net cash outflow from financing activities		(1,963)	(1,042)
Change in cash and cash equivalents		240	538
Cash and cash equivalents at 1 January		6,241	5,573
Exchange losses on cash and cash equivalents		(1)	(69)
Cash and cash equivalents at 30 June 4		6,480	6,042

¹   Predominantly relates to cash settled on derivative contracts held for operating purposes

²  In 2020, the Group took action to reduce the size of the USD hedge book by $11.8bn across 2020-2026 to reflect the fact that at that time, future operating cash flows were no longer forecast to materialise. To achieve the necessary reduction in the hedge book, a separate and distinct set of foreign exchange derivative instruments were entered into to buy $11.8bn which had the impact of fixing the fair value of the over-hedged position and provided certainty over when the cash flows to settle the position would occur in future periods. The associated cash outflow of these transactions is £1,674m and has occurred over the period 2020-2026. During the period, the Group incurred the final cash outflow of £27m (30 June 2025: £116m) with no further cash outflows expected in the remainder of 2026

³   Relates to NCI investment received in the period in respect of Rolls-Royce SMR Limited prior to their deconsolidation on 4 March 2025

⁴   The Group considers overdrafts (repayable on demand) to be an integral part of its cash management activities and these are included in cash and cash equivalents for the purposes of the cash flow statement

 

Condensed consolidated cash flow statement continued

For the half-year ended 30 June 2026

In deriving the condensed consolidated cash flow statement, movements in balance sheet items have been adjusted for non-cash items. The cash flow in the period includes the sale of goods and services to joint ventures and associates - see note 20.

	Half-year to 30 June 2026 £m	Half-year to 30 June 2025 £m
Reconciliation of movements in cash and cash equivalents to movements in net cash
Change in cash and cash equivalents	240	538
Cash flow from decrease in borrowings and lease liabilities	332	91
Less: settlement of related derivatives included in fair value of swaps below	(25)	-
Change in net cash resulting from cash flows	547	629
Lease additions, modifications and other non-cash adjustments on borrowings and lease liabilities	(311)	(63)
Exchange (losses)/gains on net cash	(28)	89
Fair value adjustments	(7)	37
Movement in net cash	201	692
Net cash at 1 January excluding the fair value of swaps	1,972	442
Net cash at 30 June excluding the fair value of swaps	2,173	1,134
Fair value of swaps hedging fixed rate borrowings	(37)	(50)
Net cash at 30 June	2,136	1,084

The movement in net cash (defined by the Group as including the items shown below) is as follows:

	At 1 January	Funds flow	Exchange differences	Fair value adjustments	Reclassi-fications	Other movements	At 30 June
	£m	£m	£m	£m	£m	£m	£m
2026
Cash at bank and in hand	889	(182)	2	-	-	-	709
Money market funds	2,424	1,342	5	-	-	-	3,771
Short-term deposits	2,931	(919)	(8)	-	-	-	2,004
Cash and cash equivalents (per balance sheet)	6,244	241	(1)	-	-	-	6,484
Overdrafts	(3)	(1)	-	-	-	-	(4)
Cash and cash equivalents (per cash flow statement)	6,241	240	(1)	-	-	-	6,480
Other current borrowings 1	(1,031)	1,028	2	(3)	-	-	(4)
Non-current borrowings	(1,768)	(860)	(13)	(4)	-	(2)	(2,647)
Lease liabilities	(1,470)	139	(16)	-	-	(309)	(1,656)
Financial liabilities	(4,269)	307	(27)	(7)	-	(311)	(4,307)
Net cash/(debt) excluding fair value of swaps	1,972	547	(28)	(7)	-	(311)	2,173
Fair value of swaps hedging fixed rate borrowings 2	(77)	25	11	4	-	-	(37)
Net cash/(debt)	1,895	572	(17)	(3)	-	(311)	2,136
2025
Cash at bank and in hand	714	121	(20)	-	-	-	815
Money market funds	1,900	1,548	6	-	-	-	3,454
Short-term deposits	2,961	(1,131)	(55)	-	-	-	1,775
Cash and cash equivalents (per balance sheet)	5,575	538	(69)	-	-	-	6,044
Overdrafts	(2)	-	-	-	-	-	(2)
Cash and cash equivalents (per cash flow statement)	5,573	538	(69)	-	-	-	6,042
Other current borrowings	(799)	-	(19)	61	(988)	(1)	(1,746)
Non-current borrowings	(2,776)	-	68	(24)	988	(1)	(1,745)
Lease liabilities	(1,555)	91	109	-	-	(61)	(1,416)
Lease liabilities included within liabilities held for sale	(1)	-	-	-	-	-	(1)
Financial liabilities	(5,131)	91	158	37	-	(63)	(4,908)
Net cash/(debt) excluding fair value of swaps	442	629	89	37	-	(63)	1,134
Fair value of swaps hedging fixed rate borrowings 2	33	-	(48)	(35)	-	-	(50)
Net cash/(debt)	475	629	41	2	-	(63)	1,084

¹   Debt repaid during the period of £1,028m is shown at prevailing market rates

²   Fair value of swaps hedging fixed rate borrowings reflects the impact of derivatives on repayments of the principal amount of debt. Net cash/(debt) therefore includes the fair value of derivatives in fair value hedges (30 June 2026: £(21)m, 31 December 2025: £(26)m) and the element of fair value relating to exchange differences on the underlying principal of derivatives in cash flow hedges (30 June 2026: £(16)m, 31 December 2025: £(51)m). The impact of derivatives on debt repaid during the period was £25m (30 June 2025: £nil), which represents the difference between the debt repaid recorded at the hedged rate (£1,053m) and prevailing market rates (£1,028m)

Condensed consolidated statement of changes in equity

For the half-year ended 30 June 2026

		Attributable to ordinary shareholders
	Notes	Share capital	Share premium	Capital redemption reserve	Cash flow hedging reserve	Translation reserve	Retained earnings / (accumulated losses) 1	Total	NCI	Total equity
		£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2026		1,689	-	5	7	418	607	2,726	27	2,753
Profit for the period		-	-	-	-	-	1,613	1,613	2	1,615
Foreign exchange translation differences on foreign operations		-	-	-	-	44	-	44	-	44
Actuarial movements on post-retirement schemes	18	-	-	-	-	-	(21)	(21)	-	(21)
Fair value movement on cash flow hedges		-	-	-	5	-	-	5	-	5
Reclassified to income statement from cash flow hedge reserve		-	-	-	(11)	-	-	(11)	-	(11)
Revaluation to fair value of other investments		-	-	-	-	-	(1)	(1)	-	(1)
OCI of joint ventures and associates		-	-	-	(1)	-	-	(1)	-	(1)
Related tax movements		-	-	-	-	(1)	6	5	-	5
Total comprehensive (expense)/income for the period		-	-	-	(7)	43	1,597	1,633	2	1,635
Share buyback programme 2		(18)	-	18	-	-	(1,136)	(1,136)	-	(1,136)
Share-based payments - direct to equity 3		-	-	-	-	-	43	43	-	43
Dividends paid		-	-	-	-	-	(417)	(417)	-	(417)
Related tax movements		-	-	-	-	-	4	4	-	4
Other changes in equity in the period		(18)	-	18	-	-	(1,506)	(1,506)	-	(1,506)
At 30 June 2026		1,671	-	23	-	461	698	2,853	29	2,882

¹   At 30 June 2026, 36,496,152 ordinary shares with an aggregate value of £265m were held for the purpose of share-based payment plans and included in retained earnings / (accumulated losses). During the period, 32,794,510 ordinary shares with an aggregate value of £238m vested in share-based payment plans

²   On 26 February 2026, the Group announced a multi-year share buyback across 2026-2028, with £2.5bn expected to be completed in 2026, this included a £200m interim programme announced on 16 December 2025 which was completed between 2 January and 20 February 2026.

    At 31 December 2025, the Company had accrued £11m in relation to the interim programme representing an estimate of the amount it was committed to purchase in 2026 under the terms of its Share Purchase Agreement but had not yet purchased. On 20 February 2026, the Company completed the interim programme in February 2026, having purchased with cash and cancelled 15,971,931 of its ordinary shares for total consideration of £200m.

    During the period to 30 June 2026, the Company also purchased 75,054,243 of its ordinary shares for total consideration of £911m, of which 73,660,842 ordinary shares at a cost of £891m were paid in cash and cancelled and 1,393,401 ordinary shares at a cost of £20m were recognised as a creditor and held as Treasury shares at 30 June 2026, representing ordinary shares that had been purchased but not yet paid for. At 30 June 2026, the Company recognised an accrual of £30m, representing an estimate of the amount committed to be purchased under the terms of its Share Purchase Agreement but as yet not purchased.

 During the period, the Company separately paid costs of £6m in relation to its multi-year buyback programme

 ³  Share-based payments - direct to equity is the share-based payment charge for the period, less actual cost of vesting, excluding those vesting from own shares and cash received on share-based schemes

 

Condensed consolidated statement of changes in equity continued

For the half-year ended 30 June 2025

		Attributable to ordinary shareholders
	Notes	Share capital	Share premium	Capital redemption reserve	Cash flow hedging reserve	Translation reserve	Accumulated losses 1	Total	NCI	Total equity
		£m	£m	£m	£m	£m	£m	£m	£m	£m
At 1 January 2025		1,701	1,012	168	13	603	(4,409)	(912)	31	(881)
Profit/(loss) for the period		-	-	-	-	-	4,416	4,416	(8)	4,408
Foreign exchange translation differences on foreign operations		-	-	-	-	(296)	-	(296)	-	(296)
NCI disposed of on disposal of businesses		-	-	-	-	-	-	-	(23)	(23)
Actuarial movements on post-retirement schemes		-	-	-	-	-	(20)	(20)	-	(20)
Fair value movement on cash flow hedges		-	-	-	(58)	-	-	(58)	-	(58)
Reclassified to income statement from cash flow hedge reserve		-	-	-	51	-	-	51	-	51
Revaluation to fair value of other investments		-	-	-	-	-	1	1	-	1
OCI of joint ventures and associates		-	-	-	5	-	(1)	4	-	4
Related tax movements		-	-	-	2	-	9	11	-	11
Total comprehensive income/(expense) for the period		-	-	-	-	(296)	4,405	4,109	(31)	4,078
Bonus issue 2		6,962	-	-	-	-	(6,962)	-	-	-
Capital reduction 2		(6,962)	(1,012)	(177)	-	-	8,151	-	-	-
Share buyback programme 3		(10)	-	10	-	-	(397)	(397)	-	(397)
Redemption of C Shares		-	-	1	-	-	(1)	-	-	-
Share-based payments - direct to equity 4		-	-	-	-	-	96	96	-	96
Dividends paid		-	-	-	-	-	(507)	(507)	-	(507)
Transactions with NCI		-	-	-	-	-	9	9	26	35
Related tax movements		-	-	-	-	-	10	10	-	10
Other changes in equity in the period		(10)	(1,012)	(166)	-	-	399	(789)	26	(763)
At 30 June 2025		1,691	-	2	13	307	395	2,408	26	2,434

¹   At 30 June 2025, 31,666,521 ordinary shares with an aggregate value of £8m were held for the purpose of share-based payment plans and included in accumulated losses. During the period, 74,400,310 ordinary shares with an aggregate value of £18m vested in share-based payment plans

²  On 1 May 2025, the Company performed a bonus issue of one share from its merger reserve for £6,962m. The merger reserve is eliminated within the consolidated statement of changes in equity and therefore is not shown in the movement table above. Subsequently, the Company performed a capital reduction against share capital, share premium, and capital redemption reserve

³  On 27 February 2025, the Group announced a £1bn share buyback programme. During the period to 30 June 2025, the Company purchased 49,137,347 of its ordinary shares for a total consideration of £383m, of which 48,623,940 ordinary shares at a cost of £378m were paid in cash and cancelled and 513,407 ordinary shares with a cost of £5m were recognised as a creditor and held as Treasury shares. The 513,407 Treasury shares held at 30 June 2025 were cancelled later in 2025. At 30 June 2025, the Company recognised an accrual of £14m, representing an estimate of the amount it was committed to purchase under the terms of its Share Price Agreement but had not yet purchased. During the period to 30 June 2025, the Company paid costs of £2m in relation to the programme

⁴  Share-based payments - direct to equity is the share-based payment charge for the period, less actual cost of vesting, excluding those vesting from own shares and cash received on share-based schemes

 

 

Notes to the Condensed Consolidated Financial Statements

 

Reporting entity

Rolls-Royce Holdings plc (the 'Company') is a public company limited by shares incorporated under the Companies Act 2006 and domiciled in the UK. These condensed consolidated interim financial statements of the Company as at and for the six months to 30 June 2026 consist of the consolidation of the Financial Statements of the Company and its subsidiaries (together referred to as the 'Group') and include the Group's interest in jointly controlled and associated entities.

The Consolidated Financial Statements of the Group as at and for the year-ended 31 December 2025 (2025 Annual Report) are available upon request from the Company Secretary, Rolls-Royce Holdings plc, Kings Place, 90 York Way, London, N1 9FX.

The Board of Directors approved the condensed consolidated interim financial statements on 30 July 2026.

Statement of compliance

These condensed consolidated interim financial statements have been prepared on the basis of the policies set out in the 2025 Annual Report, and in accordance with UK adopted IAS 34 Interim Financial Reporting and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority. They do not include all of the information required for full annual statements and should be read in conjunction with the 2025 Annual Report.

The interim figures up to 30 June 2026 and 2025 are unaudited. The 2025 Financial Statements, which were prepared in accordance with UK adopted International Accounting Standards (IAS) and interpretations issued by the IFRS interpretations Committee applicable to companies reporting under UK adopted IAS, have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Revisions to IFRS applicable in 2026

There are no new standards or interpretations issued by the IASB that had a significant impact on these condensed consolidated interim financial statements.

Revisions to IFRS not applicable to 2026

Standards and interpretations issued by the International Accounting Standards Board (IASB) are only applicable if endorsed by the UK. Other than IFRS 18 Presentation and Disclosure in Financial Statements described below, the Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable will have a significant impact on the condensed consolidated interim financial statements.

IFRS 18 Presentation and Disclosure in Financial Statements

The IASB issued a new Standard, IFRS 18 Presentation and Disclosure in Financial Statements, on 9 April 2024 that will replace IAS 1 Presentation of Financial Statements. The purpose of the new standard is to provide more consistent presentation of financial information across preparers as it is acknowledged that existing standards have given flexibility to present information in different ways. IFRS 18 Presentation and Disclosure in Financial Statements will not impact the recognition or measurement of items in the Financial Statements. Many of the existing presentation principles in IAS 1 Presentation of Financial Statements are retained, but there are some more specific requirements that will require the Group to make some changes in its future Annual Reports and Interim Financial Statements.

The new Standard has been endorsed by the UK Endorsement Board (UKEB) and will be applicable for reporting periods beginning on or after 1 January 2027. The Group does not anticipate its early adoption of the new Standard. Comparative information for 2026 will need to be restated when subsequent Financial Statements are published.

The Group has continued its implementation activities, determined that it does not have any specified main business activities and expects the most significant changes to be in relation to the presentation of items within the Statutory Consolidated Income Statement. The changes are expected to include: 'share of results of joint ventures and associates' being presented in the new investing category (30 June 2026: £16m) and included when arriving at a new subtotal 'operating profit including share of results of joint ventures and associates'; interest income (30 June 2026: £113m) will be reclassified from net financing into the new investing category; the majority of foreign exchange differences will be reclassified from net financing into the operating category (at 30 June 2026, it is expected that around £15m would have been recognised within the new investing category and around £(35)m within the financing category; the remainder of around £(150)m would have been operating); and fair value gains/(losses) related to foreign currency contracts and commodity contracts (30 June 2026: £(256)m) will be reclassified from net financing into the operating category.

The Group has made accounting policy decisions to recognise foreign exchange differences on intercompany lending and borrowing within the investing and financing categories respectively and to net any interest income and costs, and associated foreign exchange differences, on its notional cash pooling arrangement within the investing category.

The process of assessing the financial impact on the Consolidated Financial Statements will continue during the second half of 2026. 

 

Post balance sheet events

The Group has taken the latest legal position in relation to any ongoing legal proceedings and reflected these in the 30 June 2026 results as appropriate.

On 3 July 2026, the Trustee of the Rolls-Royce UK Pension Fund signed a Deed of Issue and Assignment to formally assign individual policy rights to members, thereby completing the Buy-out transaction with Pension Insurance Corporation plc (PIC) and transferring liabilities from Rolls-Royce Plc to PIC. At the point of Buy-out, the insured defined benefit pension liabilities of around £3.9bn and the corresponding asset, representing the Buy-in insurance policy, are removed from the Group's balance sheet. As the Buy-in and Buy-out have been treated as two separate transactions, with the Buy-in impact having already been recognised largely through OCI, this constitutes a cost neutral settlement event. Consequently, there is no impact on the overall balance sheet surplus position.

On 6 July 2026 the Group completed the disposal of its naval handling business to Fairbanks Morse Defense as set out in note 21. Disposal proceeds were in excess of the carrying value of the assets and liabilities.

On 26 February 2026, the Group announced a multi-year share buyback across 2026-2028, with £2.5bn expected to be completed in 2026 (including a £200m interim programme completed between 2 January and 20 February 2026). At 30 June 2026, the Company had purchased 91,026,174 shares under this programme for total consideration of £1,111m. Since the balance sheet date, the Group has settled £293m under the ongoing share buyback programme.

Climate change

In preparing the condensed consolidated interim financial statements, the Directors have continued to consider the potential impact of climate change, particularly in the context of the disclosures made in the Strategic Report within the 2025 Annual Report that set out climate-related commitments, targets and the pillars of the Rolls-Royce energy strategy.

The Directors have assessed the impact of climate change on a number of estimates, including those identified as being key sources of estimation uncertainty within the financial statements such as Civil Aerospace LTSA revenues. When making these assessments the Directors include consideration of the risks associated with changing customer demand, changes in costs due to carbon pricing and commodity price changes and change in investment requirements. As details of what specific future intervention measures will be taken by governments are not yet available, carbon pricing continues to be used to quantify the potential impact of future policy changes on the Group. The approach is consistent with that disclosed in note 1 of the 2025 Annual Report.

There has been no material impact on the Group's financial reporting from changes in climate-related estimates since the year-ended 31 December 2025. The Group's assessment remains that climate change is not expected to have a significant impact on the Group's current going concern assessment nor on the viability of the Group over the next five years.

Going concern

Overview

In adopting the going concern basis for preparing these condensed consolidated financial statements, the Directors have undertaken a review of the Group's cash flow forecasts and available liquidity, along with consideration of the principal risks and uncertainties through to December 2027 (the 'going concern period'). The processes for identifying and managing risk are described in the Group's 2025 Annual Report on pages 48 to 56. As described on those pages, the risk management process and the going concern statement are designed to provide reasonable but not absolute assurance.

Forecasts

Recognising the challenges of reliably estimating and forecasting the impact of external factors on the Group, the Directors have reviewed the financial forecasts and liquidity forecasts with consideration given to the potential impact of severe but plausible risks. Two forecasts have been modelled in the assessment of going concern, along with a likelihood assessment of these forecasts. The base case forecast reflects the Directors' current expectations of future trading. A downside forecast has also been modelled which envisages severe but plausible downside risks. Both forecasts have been modelled over the going concern period.

The Group's base case forecast reflects the Directors' best estimation of how the business plans to perform over the going concern period considering the current macroeconomic environment. Macro-economic assumptions have been modelled using externally available data based on the most likely forecasts with general inflation at around 2%-3%, wage inflation at an average of 3%-4%, interest rates at around 2%-4% and GDP growth at around 2%-4%.

The downside forecast assumes Civil Aerospace large engine flying hours remain at average second quarter 2026 levels throughout the going concern period, reflecting slower GDP growth in this forecast when compared with the base case. It also assumes a more pessimistic view of general inflation at around 2%-3% higher than the base case covering a broad range of costs including product costs, energy, commodities and jet fuel. Wage inflation in the downside forecast is 1%-2% higher than the base case and interest rates are 1%-2% higher. These macro-economic pressures have been modelled across the whole going concern period. The downside forecast also considers lower demand as a result of slower market growth, and potential output risks associated with increasing volumes and possible ongoing supply chain challenges.

In reviewing the Group's cash flow forecasts and available liquidity, the Directors have considered the ongoing geopolitical uncertainty and the impact on macroeconomic variables, including the potential indirect impact on economic growth, foreign exchange and inflation. The Directors continue to closely monitor these factors to ensure that appropriate action is taken to mitigate any potential business impact.

In modelling both the base case and downside forecast, the repayment of bonds due in 2027 (being $1bn and £545m respectively) are assumed to be repaid from cash in both the base case and downside forecast although a decision on this has not yet been taken.

Going concern continued

In preparing the condensed consolidated interim financial statements, the Directors have continued to consider the impact of climate change, particularly in the context of disclosures made in the Strategic Report in the 2025 Annual Report. Consistent with our assessment in the 2025 Annual Report, climate change is not expected to have a significant impact on the Group over the going concern period.

Liquidity and borrowings

At 30 June 2026, the Group had liquidity of £9.0bn including cash and cash equivalents of £6.5bn and undrawn facilities of £2.5bn.

The Group's committed borrowing facilities at 30 June 2026 and 31 December 2027 are set out below. None of the facilities are subject to any financial covenants or rating triggers which could accelerate repayment.

£m	30 June 2026	31 December 2027
Issued bond notes 1	2,668	1,351
Revolving credit facility (undrawn) 2	2,500	2,500
Total committed borrowing facilities	5,168	3,851

¹ The value of issued bond notes reflects the impact of derivatives on repayments of the principal amount of debt. Bonds outstanding at 31 December 2027 mature in May 2028 (€550m), May 2031 (€500m) and May 2036 (€500m)

² The £2.5bn revolving credit facility matures in December 2030 with two subsequent one-year extension options

Taking into account the maturity of these borrowing facilities, the Group has committed facilities of at least £3.8bn available throughout the going concern period.

Conclusion

After reviewing the current liquidity position and the cash flows modelled under both the base case and downside forecasts, the Directors consider that the Group has sufficient liquidity to continue in operational existence over the going concern period to 31 December 2027 and are therefore satisfied that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements.

Key areas of judgement and sources of estimation uncertainty

The determination of the Group's accounting policies requires judgement. The subsequent application of these policies requires estimates, and the actual outcome may differ from that calculated. The key areas of judgement and sources of estimation uncertainty as at 31 December 2025, that were assessed as having a significant risk of causing material adjustments to the carrying amount of assets and liabilities, are set out in note 1 to the Consolidated Financial Statements in the 2025 Annual Report and are summarised below. During the period, the Group has re-assessed these and where necessary updated the key judgements and estimation uncertainties. Sensitivities for key sources of estimation uncertainty are disclosed where this is appropriate and practical.

Area	Key judgements	Key sources of estimation uncertainty	Sensitivities performed
Revenue recognition and contract assets and liabilities	Whether Civil Aerospace OE and aftermarket contracts should be combined. How performance on long-term aftermarket contracts should be measured. Whether long-term aftermarket contracts contain a significant financing component. Whether any costs should be treated as wastage. Whether the Civil Aerospace LTSA contracts are warranty style contracts entered into in connection with OE sales and therefore can be accounted for under IFRS 15 Revenue from Contracts with Customers. Whether sales of spare engines to joint ventures are at fair value. When revenue should be recognised in relation to spare engine sales.	Estimates of future revenue, including customer pricing, and costs of long-term contractual arrangements, including the impact of climate change.	Based upon the stage of completion of all large engine LTSA contracts within Civil Aerospace at 30 June 2026, the following changes in estimate would result in catch-up adjustments being recognised in the period in which the estimates change (at underlying FX rates): A change in forecast EFH of 1% over the remaining term of the contracts would impact LTSA income and to a lesser extent costs, resulting in an impact of around £30m. This would be expected to be seen as a catch-up change in revenue or, to the extent it impacts onerous contracts, within cost of sales. A 2% increase or decrease in our pricing to customers over the life of the contracts would lead to a revenue catch-up adjustment in the next 12 months of around £440m. A 2% increase or decrease in shop visit costs over the life of the contracts would lead to a revenue catch-up adjustment in the next 12 months of around £130m.
Risk and revenue sharing arrangements (RRSAs)	Determination of the nature of entry fees received.
Research and development	Determination of the point in time where costs incurred on an internal programme development meet the criteria for capitalisation. Determination of the basis for amortising capitalised development costs.
Impairment of non-current assets	Determination of cash-generating units for assessing impairment of goodwill.
Provisions	Whether any costs should be treated as wastage.	Estimates of the future revenues and costs to fulfil onerous contracts.	An increase in Civil Aerospace large engines estimates of LTSA costs of 2% over the remaining term of the contracts could lead to a £50m to £70m increase in the provision for contract losses across all programmes.