Rolls Royce announced its 2025 results on February 26th 2026 which saw Rolls Royce smash expectations. Revenues grew by 12% to £20.06 billion, ahead of the expected £19.6 billion which was anticipated. Underlying pre-tax profit spiked by 46% to £3.35 billion. The company also announced a dividend for its shareholders of £0.05 per share - equating to a yield of around 1.6%.
The group’s Civil Aerospace unit, which accounts for over half of the group’s income, grew by an additional 8% over the year. This figure is over double what the Civil Aerospace unit was doing back in 2020 - as demand tanked following the spread of COVID 19.
The company’s recovery is striking given the challenges it faced during the pandemic. As global air travel collapsed in 2020 following the spread of COVID-19, Rolls-Royce’s business model - which relies heavily on servicing aircraft engines based on flying hours - came under severe pressure. In order to combat this and strengthen the balance sheet, the company announced a £2 billion rights issue. This gave shareholders the right to buy 10 new shares for every three already owned, at a price of 32p per new share. Although at a 17 year low when this was announced 1st October, shares were trading at £1.30. The rights issue also saw the number of shares available from 1.93 billion to 8.37 billion as outlined by Interactive Investor
The causes as to why the share price continues to rise are believed to come from a couple of factors. Rolls Royce has prioritised efficiency savings through cost cutting methods. This has allowed the company to be able to expand without paying huge premiums. CEO Tufan Erginbilgiç took charge on January 1st 2023 following former CEO Warren East stood down from the role. Tufan Erginbilgiç has been heavily credited for this turnaround as shown through the company increasing its return to capital figures heavily to 18.9% from an original 13.8%.
Tufan Erginbilgiç must be credited for this run as before his takeover the company was yet to break £1 level in recent times yet he was able to exceed this and even beat its high in December 2013 of £11.22. The improvement in cash flow and the significant reduction of debt also strengthened the company’s balance sheet, reducing risk for investors and further driving the share price upwards. In addition, the post-pandemic recovery in global air travel has increased demand for Rolls-Royce engines and maintenance contracts, generating additional revenue and reinforcing long-term growth potential.
In a recent post he made via his LinkedIn, he also indicated further growth potentials for the company:
‘Beyond the mid-term, we have positioned the businesses to benefit from several positive long-term trends, such as higher defence spending, GDP growth supporting increased air travel, digitalisation and AI, and the energy transition, including a nuclear renaissance. Because of our transformation, we are now able to address these trends from a position of strength.’
He also added that:
‘Last year was another year of strong financial and strategic delivery, building upon the substantial progress that we have made since the start of 2023, with significant improvement across all our operational and financial metrics. I was very pleased to be able to tell the market that we are upgrading our mid-term targets.’
It has been a remarkable run for the British company and the outlook suggests that the share price could continue to rise, although there are risks. The company’s efficiency improvements and strong cash flow, provides a solid financial foundation. Whereas, higher defence spending and the rapid development and growth of AI, continues to offer potential for sustained revenue growth.
However, investors should remain cautious. Rolls Royce like any company is still hugely affected by geo-political tensions. We have seen with the events in Iran have an overall negative effect on the FTSE 100 with it being down around 4.5%. This is also shown through Rolls Royce sudden dip with the share price down 6.5% within the past week. Overall, if Rolls-Royce continues to deliver on efficiency, profitability and innovation, the run may continue, but external factors will still remain an important influence on the company's future performance.