Rolls-Royce Set to Reveal Latest Turnaround Progress
The British aerospace and defence giant Rolls-Royce is preparing to deliver a significant trading update on Thursday, following a year of remarkable share price growth. The company, which has major UK operations in Derby and Filton near Bristol, has seen its stock reach record highs throughout 2025, driven by increased global defence expenditure and a strong recovery in international air travel.
Financial Performance Soars Beyond Expectations
Underlying operating profits surged by an impressive 50% to reach £1.7 billion during the first half of 2025. This outstanding performance prompted the company to substantially upgrade its full-year forecast in July. Initially projecting profits between £2.7 billion and £2.9 billion, Rolls-Royce now anticipates annual earnings between £3.1 billion and £3.2 billion.
The manufacturer, which produces engines for major aircraft including those from Boeing and Airbus, has successfully navigated supply chain challenges and tariff concerns. Strong demand for its large engines and improved contract margins have been central to this financial success. The company's performance reflects broader trends, including heightened defence spending due to geopolitical uncertainty and the sustained recovery of international travel following the pandemic.
Leadership Drives "Miraculous Recovery"
Victoria Scholar, head of investment at interactive investor, described Rolls-Royce as a "standout stock market winner", noting that shares have rallied approximately 100% so far this year. She credited Chief Executive Tufan Erginbilgic, who took leadership in January 2023, with spearheading what she called a "miraculous recovery" at the previously struggling company.
The former BP executive has implemented sweeping changes since his appointment, focusing on cost reduction, engine improvement investments, and digital transformation. Michael Hewson at CMC Market Insights noted that Mr Erginbilgic, who initially described the company as a "burning platform", has not only extinguished the flames but "turbocharged the business into a cash machine".
Future Focus on Small Modular Reactor Business
Beyond the immediate financial results, attention will focus on the company's small modular reactor (SMR) division. Despite summer speculation about a potential spin-off, which the company quickly denied, Rolls-Royce has confirmed discussions with investment banks regarding future funding plans for this segment.
The SMR business is projected to become profitable by 2030 and begin generating revenues by the end of 2025. Analysts suggest that any stock market separation of the SMR unit would need to ensure Rolls-Royce retains substantial ownership to maximise value for shareholders.
Thursday's update is expected to demonstrate continued progress in the long-term transformation strategy first outlined in 2023, confirming that Rolls-Royce's remarkable turnaround remains firmly on course.
