Rolls-Royce Holdings (RR.L) — Company Research
Last Updated: 19 July 2026
Rolls-Royce Holdings plc (LSE: RR.) designs and services large aero engines for widebody aircraft, builds defence propulsion for combat aircraft, transport fleets and nuclear submarines, and supplies mtu-branded power systems for data centres, ships and governments. Three years into CEO Tufan Erginbilgiç's transformation, 2025 delivered record underlying operating profit of £3.5bn, free cash flow of £3.3bn, an upgraded set of mid-term targets and a £7bn–£9bn multi-year buyback — and the shares have re-rated to within sight of their all-time high. Half-year 2026 results land on 30 July. The numbers, the valuation and both sides of the case are below, with no analyst opinions.
1. Company Snapshot
| Field | Value |
|---|---|
| Company | Rolls-Royce Holdings plc |
| Ticker / Listing | LSE: RR. (ADR: RYCEY) |
| Sector | Aerospace & Defence |
| Headquarters | London / Derby, United Kingdom (heritage to 1906) |
| CEO / Leadership | Tufan Erginbilgiç, Chief Executive Officer (CEO, since January 2023); Helen McCabe, CFO; Anita Frew, Chair |
| Employees | ~42,600 worldwide (2025) |
| Fiscal year end | 31 December |
| Revenue (FY2025) | £21,207m statutory (underlying revenue £20,059m, +14% organic) |
| Underlying operating profit (FY2025) | £3,462m, 17.3% margin (2024: £2,464m) |
| Net cash (31 Dec 2025) | £1,895m (2024: £475m) |
| Market cap | ~£113bn (~1,370p per share, 17 July 2026) |
2. Bull & Bear Case
Bull Case
- Transformation delivering: Underlying operating profit rose from £2.5bn (2024) to £3.5bn (2025) at a 17.3% margin, guidance for 2026 is £4.0bn–£4.2bn, and the mid-term (2028) target was upgraded to £4.9bn–£5.2bn profit and £5.0bn–£5.3bn free cash flow — the third major upgrade in three years.
- Civil aftermarket engine: Civil Aerospace margin hit 20.5% on 15% organic revenue growth in 2025, powered by long-term service agreements over a growing installed widebody base; all OE contracts and the most significant onerous aftermarket contracts have been renegotiated, aircraft-on-ground fell to single digits by April 2026, and Q1 2026 large-engine shop visits grew 12% with fresh Trent orders from Atlas Air and Delta.
- Power Systems data-centre boom: Underlying revenue rose 19% in 2025 with data-centre revenue up 35% and margin up 4.5pts to 17.4% — mtu backup and prime power is a direct AI-infrastructure play, with the young battery-storage (BESS) business now at breakeven.
- SMR franchise: Rolls-Royce SMR is the sole provider for the UK's first small-modular-reactor programme (government contract signed 13 April 2026), signed an early-works contract with Czech utility ČEZ (24 April 2026) and was selected for Sweden's first new nuclear in 40 years (15 June 2026) — the only company with multiple contractual SMR commitments in Europe, targeted to be profitable and cash-generative by 2030.
- Balance sheet and shareholder returns: Net cash of £1.9bn, FY2025 free cash flow of £3,270m, a 58% dividend increase to 9.5p, and a £7bn–£9bn buyback across 2026–2028 (£2.5bn this year, over £750m already done by 30 April 2026).
Bear Case
- Valuation leaves no room: At ~1,370p the shares trade at roughly 46x 2025 underlying EPS (29.55p) and ~35x free cash flow, within ~10% of June's all-time high after a 55% one-year run — priced for flawless delivery of targets that stretch to 2028.
- Civil-cycle exposure: Just over half of underlying revenue is Civil Aerospace, geared to widebody flying hours; a pandemic-style shock, recession or conflict disrupting long-haul travel would hit LTSA cash receipts and aftermarket profit quickly, as 2020–21 demonstrated.
- Supply chain and tariffs: Management itself flags supply-chain constraints and tariffs as persistent headwinds; parts shortages or cost inflation could slow the OE ramp and squeeze the very margins the re-rating is built on.
- Execution and capital intensity ahead: The 2028 targets, the £2.5bn-a-year buyback cadence and SMR all assume sustained execution; SMR requires years of investment before 2030 breakeven, and 2025's statutory profit (£5.8bn, EPS 69.41p) was flattered by non-cash hedge-book gains and deferred-tax credits that will not repeat.
3. Business Segments
FY2025 underlying revenue by division (Rolls-Royce 2025 full-year results):
| Segment | % of revenue | What it is |
|---|---|---|
| Civil Aerospace | 51.8% (£10,382m, +15% organic) | Trent and Pearl engines plus long-term service agreements for widebody airliners and business aviation; 20.5% underlying margin in 2025 |
| Power Systems | 24.4% (£4,892m, +19%) | mtu engines and generation solutions for data centres (+35% in 2025), marine, defence and energy customers, plus battery storage |
| Defence | 23.8% (£4,772m, +8%) | Combat (EJ200), transport (TP400, AE), naval propulsion and UK nuclear submarine reactors; AUKUS and B-52 re-engining workstreams |
| All Other / New Markets | ~0.1% (£13m) | Rolls-Royce SMR and electrical/new-market ventures (£140m underlying operating loss in 2025 as investment continues) |
4. Business Model & Moat
How it makes money. Civil engines are frequently sold at slim or negative margin to win the slot, with the economics recovered over 25+ years of long-term service agreements priced per engine flying hour — a razor-and-blades model that turns the installed base into an annuity. Defence adds long-cycle government contracts (including the monopoly on UK submarine reactors), and Power Systems sells engines plus service into data-centre, marine and governmental demand.
The moat. Certification barriers, decades of safety data and the physics of large turbofans keep the widebody engine market an effective duopoly between Rolls-Royce (Trent/UltraFan) and GE; switching costs on an in-service fleet are prohibitive, and sovereign defence relationships (UK, US, AUKUS) are protected by security clearance and treaty.
The transformation. Since 2023 management has renegotiated loss-making contracts, repriced the aftermarket, cut costs and lifted returns — taking the group from junk-rated pandemic survivor (net debt £5.2bn in 2021) to investment-grade net-cash compounder inside four years, with capital now recycled into UltraFan, SMR and shareholder returns.
5. Financial Health
Figures from Rolls-Royce full-year and half-year results announcements (statutory revenue and basic EPS; underlying EPS as the adjusted measure).
| Fiscal Year | Revenue (£m) | YoY % | GAAP EPS | Adjusted EPS | Dividend/share | Long-term debt (YE) |
|---|---|---|---|---|---|---|
| 2021 | £11,218m | −2.0% | 1.48p† | 0.11p | Nil | £7,497m |
| 2022 | £13,520m | +20.5% | (14.24)p† | 1.95p | Nil | £5,597m |
| 2023 | £16,486m | +21.9% | 28.85p† | 13.75p | Nil | £4,950m |
| 2024 | £18,909m | +14.7% | 30.05p | 20.29p | 6.0p | £4,035m |
| 2025 | £21,207m | +12.2% | 69.41p‡ | 29.55p | 9.5p | £2,846m |
† 2021–2023 GAAP EPS shown for continuing operations (ITP Aero was sold in September 2022). ‡ 2025 statutory EPS was inflated by non-cash items: the statutory-to-underlying bridge includes ~£1,960m of FX/derivative remeasurement gains and ~£1,130m of net deferred-tax effects (including a £277m UK deferred-tax-asset credit). Adjusted EPS is Rolls-Royce's underlying basic EPS. Long-term debt is non-current borrowings and lease liabilities per the balance sheet; net cash/(debt) was £(5,157)m in 2021, £(3,251)m in 2022, £(1,952)m in 2023, £475m in 2024 and £1,895m in 2025. FY2021 YoY per the 2021 annual report (revenue 2% lower than 2020).
Rolls-Royce reports half-yearly, not quarterly:
| Quarter / Half | Revenue (£m) | Adjusted EPS | GAAP EPS |
|---|---|---|---|
| H2 2025 | £11,717m† | 13.81p† | 17.03p† |
| H1 2025 | £9,490m | 15.74p | 52.38p‡ |
| H2 2024 | £10,048m† | 11.34p† | 16.34p† |
| H1 2024 | £8,861m | 8.95p | 13.71p |
| FY 2025 | £21,207m | 29.55p | 69.41p |
Statutory revenue and basic EPS; Adjusted = underlying basic EPS. † H2 figures derived as full year minus H1. ‡ H1 2025 statutory EPS includes recognition of UK deferred tax assets and hedge-book gains (statutory PBT £4,841m vs underlying £1,689m). FY2025 cash flow (used in Section 6): net cash inflow from operating activities £4,565m, capital expenditure £978m (including PP&E additions £621m and intangible additions £364m), depreciation, amortisation and impairment £900m, free cash flow £3,270m.
6. Valuation Metrics
Raw metrics, July 2026. Not opinions on whether the stock is cheap or expensive.
| Metric | Value |
|---|---|
| Market cap | ~£113bn (~1,370p per share, 17 July 2026, London Stock Exchange) |
| Enterprise value | ~£111bn (market cap ~£112.9bn + total borrowings and lease liabilities £4.27bn − cash and cash equivalents £6.24bn, per 31 December 2025 balance sheet) |
| Trailing P/E (GAAP) | ~19.7x (1,370.4p ÷ FY2025 statutory basic EPS 69.41p). Caution: 2025 statutory EPS includes large one-off tax credits and hedge gains; on underlying EPS of 29.55p the multiple is ~46x |
| P/E (forward) | n/a — Rolls-Royce guides on operating profit and cash, not EPS (2026 guidance: underlying operating profit £4.0bn–£4.2bn, free cash flow £3.6bn–£3.8bn) |
| P/S (TTM) | ~5.3x (market cap ~£112.9bn ÷ FY2025 statutory revenue £21,207m; H1 2026 not yet reported) |
| EV/EBITDA (TTM) | ~21x (EV ~£110.9bn ÷ FY2025 EBITDA £5,368m; EBITDA = statutory operating profit £4,468m + depreciation, amortisation and impairment £900m per FY2025 accounts. On underlying operating profit the multiple is ~25x) |
| P/FCF | ~35x (market cap ~£112.9bn ÷ FY2025 free cash flow £3,270m, Rolls-Royce definition after capex, interest and tax; simple operating cash flow £4,565m − capex £978m gives £3,587m, ~31x) |
| 52-week high | ~1,533p (25 June 2026, all-time high) |
| 52-week low | ~927p (July 2025) |
| Short interest (% of float) | No current disclosed net short positions at or above the FCA's 0.5% public-disclosure threshold (FCA daily short-positions register dated 10 July 2026; last disclosed positions date from 2020) |
| Days to cover | n/a — no consolidated short-interest print exists for LSE-listed shares |
7. Growth Drivers — What Are They Building?
Four engines of growth are being built at once. First, the Civil aftermarket: every new Trent delivered (40 XWB-97s ordered by Atlas Air, plus Delta commitments for XWB-84 EP and Trent 7000 in April 2026) adds decades of flying-hour service revenue, while time-on-wing programmes lift margin per visit; UltraFan technology is being matured for the next widebody cycle and potential narrowbody re-entry. Second, Defence: NATO rearmament, the AUKUS submarine programme (Rolls-Royce supplies the UK's naval reactors), B-52 re-engining deliveries and June 2026 US Air Force funding to develop an AE-based engine for autonomous collaborative combat aircraft expand a long-cycle order book. Third, Power Systems: data-centre demand (+35% revenue in 2025) has turned mtu gensets into an AI-buildout beneficiary, with battery storage now breakeven and further growth potential flagged by management. Fourth, Rolls-Royce SMR: with the UK government contract signed, ČEZ early works underway in Czechia and selection in Sweden, the 470MW factory-built reactor aims at profitability and positive cash flow by 2030 — optionality on European nuclear that peers lack. Management's 2028 targets: £4.9bn–£5.2bn underlying operating profit, 18–20% margins and £5.0bn–£5.3bn of free cash flow.
8. Competitive Landscape
Engine and defence-propulsion comparators:
| Peer | Market cap (Jul 2026) | Key 2025 metric |
|---|---|---|
| GE Aerospace (NYSE: GE) | ~$385bn | FY2025 revenue $45.9bn, +18% year on year — widebody duopoly rival and CFM narrowbody leader |
| Safran (EPA: SAF) | ~$159bn | FY2025 revenue €31.3bn, +14.7%; LEAP deliveries up 28% — CFM partner with GE |
| BAE Systems (LSE: BA.) | ~£58bn ($78bn) | FY2025 sales a record £30.7bn (+10%) with an £83.6bn order backlog — UK defence peer |
| MTU Aero Engines (ETR: MTX) | ~$22bn | FY2025 adjusted revenue a record €8.7bn, +16% — GTF partner and MRO specialist |
Rolls-Royce's distinctive position: the only pure-play large-engine maker with a defence-nuclear monopoly (UK submarines), a data-centre power franchise and a contracted European SMR pipeline in the same group.
9. Insider Activity
UK PDMR (director dealing) disclosures in 2026 have been routine share-plan events rather than discretionary open-market trades. Chief Executive (CEO) Tufan Erginbilgiç and CFO Helen McCabe transacted under the Rolls-Royce Incentive Plan on 2 March 2026:
| Name | Date | Type | Shares | Price | Value | Plan Type |
|---|---|---|---|---|---|---|
| Tufan Erginbilgiç (CEO) | 2 Mar 2026 | Vesting; sale to cover tax | 8,822 vested / 4,155 sold | n/d | n/d | Rolls-Royce Incentive Plan (RNS PDMR) |
| Helen McCabe (CFO) | 2 Mar 2026 | Vesting; sale to cover tax | n/d | n/d | n/d | Rolls-Royce Incentive Plan (RNS PDMR) |
A further routine Director/PDMR shareholding RNS followed on 12 June 2026 (share-plan related). No material discretionary insider selling has been disclosed in 2026; the CEO retained the balance of his vested shares.
10. Key Risks
- Civil Aerospace cyclicality (Macro/Operational): Over half of revenue depends on widebody flying hours; a travel shock, recession or geopolitical disruption to long-haul routes would cut LTSA receipts and aftermarket margin quickly, as the pandemic proved.
- Supply chain and tariffs (Operational): Management repeatedly flags parts shortages, supplier fragility and tariff costs; a worsening would slow OE deliveries, extend turnaround times and pressure margins.
- Execution risk on stretch targets (Strategic): The re-rating prices in the upgraded 2028 targets (£4.9bn–£5.2bn profit); any guidance miss, margin stall or buyback pause would test a share price near record highs.
- SMR delivery and capital intensity (Strategic/Financial): Small modular reactors are first-of-a-kind engineering with government counterparties; cost overruns, regulatory delay or funding needs before the targeted 2030 breakeven could turn the option into a drag.
- FX and hedge-book volatility (Financial): A large USD hedge book creates big non-cash statutory swings (2025's £1,960m gain can reverse), and the statutory-underlying gap complicates earnings quality.
- Defence-budget and export dependence (Regulatory/Political): Defence growth assumes sustained UK/US/NATO budgets and export licences; political change or programme cancellations (e.g. submarine or CCA phases) would hit the long-cycle book.
11. Recent Developments
- 15 Jun 2026 — Sweden selects Rolls-Royce SMR. Chosen by Videberg Kraft to deliver three small modular reactors on Sweden's west coast — the country's first new nuclear power in over 40 years.
- 30 Apr 2026 — AGM trading update: 2026 guidance affirmed. Underlying operating profit guidance of £4.0bn–£4.2bn and free cash flow of £3.6bn–£3.8bn maintained; Q1 large-engine OE deliveries +18%, shop visits +12%, aircraft-on-ground down to single digits; more than £750m of the £2.5bn 2026 buyback tranche completed; 40 Trent XWB-97s ordered by Atlas Air plus Delta commitments.
- 29 Apr 2026 — 100% hydrogen engine milestone. With easyJet, a modified Pearl 15 ran to full take-off power on 100% hydrogen at NASA Stennis — a world first for a modern civil jet engine across a full flight cycle.
- 24 Apr 2026 — Czech SMR early-works contract. Signed with ČEZ Group for the Czech Republic's first SMR at Temelin; first Czech office opened — Rolls-Royce SMR is the only company with multiple contractual SMR commitments in Europe.
- 13 Apr 2026 — UK government SMR contract signed. Landmark contract with the UK Government for delivery of small modular reactors as sole selected provider.
- 26 Feb 2026 — Record 2025 results, buyback and upgraded targets. Underlying operating profit £3.5bn (17.3% margin), free cash flow £3.3bn, net cash £1.9bn, total 2025 dividend 9.5p (+58%), a £7bn–£9bn 2026–2028 buyback announced and mid-term targets raised to £4.9bn–£5.2bn profit.
June 2026 also brought US Air Force funding to develop an AE-based engine for autonomous collaborative combat aircraft alongside GE — extending the US defence footprint.
12. Key Dates
- 30 Jul 2026 — 2026 Half Year results (guidance: FY26 underlying operating profit £4.0bn–£4.2bn, free cash flow £3.6bn–£3.8bn)
- Expected Sep 2026 — interim dividend payment (2025 interim was 4.5p, paid in September; 2026 interim to be set with H1 results)
- Expected Feb 2027 — 2026 Full Year results and next buyback tranche update
The £2.5bn 2026 buyback tranche runs through the year, and the Pioneer Works SMR manufacturing development centre in Derby is due to open in the final quarter of 2026.
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13. Thesis Verdict
The central thesis. Rolls-Royce sells widebody aero engines at thin margins and harvests decades of flying-hour service revenue, alongside defence propulsion (including the UK's submarine reactors) and mtu power systems now riding data-centre demand. FY2025 delivered underlying operating profit of £3.5bn at a 17.3% margin, free cash flow of £3.3bn and net cash of £1.9bn; 2026 guidance of £4.0bn–£4.2bn was affirmed on 30 April 2026, mid-term 2028 targets were raised to £4.9bn–£5.2bn, and a £7bn–£9bn buyback is under way. The near-term catalyst is the 30 July 2026 half-year results; the structural drivers are the growing installed engine base and an SMR pipeline contracted in the UK, Czechia and Sweden.
What would confirm or break it. Half-year results on 30 July landing within or above guidance, continued shop-visit and data-centre growth and further SMR milestones would confirm the case. It would break on a civil-aviation demand shock, supply-chain or tariff deterioration squeezing the OE ramp and margins, or any miss against stretch targets that a ~46x underlying-EPS valuation already assumes.
Watchpoints
- Confirms2026 Half Year results (11 days) landing in line with or above management guidance.
- ConfirmsEvidence supporting the "Transformation delivering:" thesis continuing to build across subsequent filings.
- InvalidatesMaterialisation of the "Civil Aerospace cyclicality (Macro/Operational):" risk, or any disclosure that fundamentally alters the capital-return or growth profile stated by management.
Diagnostic grid
Generated by ChartsView research tooling. Thesis strength measures how well the evidence in this report supports the company's stated thesis — it is NOT a buy/sell rating or price target. ChartsView is not authorised by the FCA to provide regulated investment advice. Generated 19 Jul 2026.