2025 Half Year Results

About this update from Rolls-royce Holdings Plc

[{"type":"text","content":"\n \n This announcement contains inside information. \n   \n \n \n \n \n \n \n \n   \n \n ROLLS-ROYCE HOLDINGS PLC - 2025 Half Year Results \n \n \n   \n   \n   \n 31 July 2025 \n \n \n \n \n   \n                                                                                                                                                                       \n \n \n \n \n Strong first half performance, demonstrating our transformation in action; FY25 guidance raised \n \n \n \n \n   \n \n \n \n \n   \n \n \n - \n \n \n Strong first half performance driven by continued progress in our multi-year transformation, despite challenges from the supply chain and tariffs \n \n \n \n \n   \n \n \n - \n \n \n Underlying operating profit rose by 50% to £1.7bn with a margin of 19.1%, reflecting the impact of our strategic initiatives, operational effectiveness, and performance management \n \n \n \n \n   \n \n \n - \n \n \n Free cash flow of £1.6bn driven by higher operating profit and continued LTSA balance growth \n \n \n \n \n   \n \n \n - \n \n \n Full year 2025 guidance raised: we now expect £3.1bn-£3.2bn underlying operating profit and £3.0bn-£3.1bn free cash flow \n \n \n \n \n   \n \n \n - \n \n \n Growing resilience: Net cash balance stood at £ 1.1bn and TCC/GM ratio improved to 0.35x \n \n \n \n \n   \n \n \n - \n \n \n Shareholder returns: An interim dividend of 4.5p per share to be paid in September; and, in addition, we completed £0.4bn of our planned £1bn share buyback programme for 2025 during the period \n \n \n \n \n   \n Tufan Erginbilgic, CEO said: \"Our multi-year transformation continues to deliver. Our actions led to strong first half year results, despite the challenges of the supply chain and tariffs. We are continuing to expand the earnings and cash potential of Rolls-Royce. \n We delivered continued strong operational and strategic progress in the first half of 2025. In Civil Aerospace, we achieved significant time on wing milestones and delivered improved aftermarket profitability. In Power Systems, where we now see further growth potential, we continued to capture profitable growth across data centres and governmental. In addition, Rolls-Royce SMR was selected as the sole provider of the UK's first small modular reactor programme. We expect Rolls-Royce SMR to be profitable and free cash flow positive by 2030. \n A strong start to the year gives us confidence to raise our guidance for 2025. We now expect to deliver underlying operating profit of £3.1bn-£3.2bn and free cash flow of £3.0bn-£3.1bn. This builds further conviction in our mid-term targets, which include underlying operating profit of £3.6bn-£3.9bn and free cash flow of £4.2bn-£4.5bn. We see these targets as a milestone, not a destination, with substantial growth prospects beyond the mid-term.\" \n Half Year 2025 Group Results \n \n \n \n \n   \n \n \n Underlying \n H1 2025 1 \n \n \n Underlying \n H1 2024 1 \n \n \n Statutory \nH1 2025 \n \n \n Statutory \nH1 2024 \n \n \n \n \n £ million \n \n \n \n \n Revenue \n \n \n 9,057 \n \n \n 8,182 \n \n \n 9,490 \n \n \n 8,861 \n \n \n \n \n Operating profit \n \n \n 1,733 \n \n \n 1,149 \n \n \n 2,074 \n \n \n 1,646 \n \n \n \n \n Operating margin % \n \n \n 19.1% \n \n \n 14.0% \n \n \n 21.9% \n \n \n 18.6% \n \n \n \n \n Profit before taxation \n \n \n 1,689 \n \n \n 1,035 \n \n \n 4,841 \n \n \n 1,416 \n \n \n \n \n Basic earnings per share (pence) 2 \n \n \n 15.74 \n \n \n 8.95 \n \n \n 52.38 \n \n \n 13.71 \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n Free cash flow \n \n \n 1,582 \n \n \n 1,158 \n \n \n \n \n \n \n \n \n \n \n Return on capital (%) 2, 3 \n \n \n 16.9% \n \n \n 13.8% \n \n \n \n \n \n \n \n \n \n \n Net cash flow from operating activities \n \n \n \n \n \n \n \n \n 2,018 \n \n \n 1,669 \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n 30 Jun 2025 \n \n \n 31 Dec 2024 \n \n \n \n \n Net cash \n \n \n \n \n \n \n \n \n 1,084 \n \n \n 475 \n \n \n \n \n   \n   \n \n \n \n \n 1 \n \n \n 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 43 to 46 \n \n \n \n \n 2 \n \n \n In H1 2025, the Group recognised a £277m credit to underlying profit after tax (PAT) in respect of deferred tax assets on UK tax losses. This £277m credit has been adjusted in the calculation of the dividend per share, earnings per share and return on capital. For further details, see note 5, page 29 \n \n \n \n \n 3 \n \n \n Adjusted Return on Capital is defined on page 46 and is abbreviated to return on capital \n \n \n \n \n \n \n Half Year 2025 performance summary \n ·    Strategic delivery: The first half of 2025 has been another period of strong strategic delivery, with significant year on year improvement across all key financial metrics. Driving this improvement were our strategic initiatives, including commercial optimisation and cost efficiency benefits. Strong financial performance was achieved despite an uncertain external environment, including continued supply chain challenges and tariffs . We expect to fully offset the impact of the announced tariffs through the mitigating actions we are taking. We are closely monitoring the potential indirect impact on economic growth, foreign exchange rates, and inflation and we will continue to take the necessary actions. We have seen some improvement in the supply chain, notably the availability of finished parts, helped by our actions, although we continue to see inflationary pressure in product costs. \n ·    Significant operating profit and margin growth: Underlying operating profit was £1.7bn (H1 2024: £1.1bn) with an operating margin of 19.1% (H1 2024: 14.0%). The largest margin improvement was in Civil Aerospace, which delivered an operating margin of 24.9% (H1 2024: 18.0%). This was driven by strong large engine aftermarket performance, contractual margin improvements, and higher spare engine profit. Defence delivered an underlying operating margin of 15.4% (H1 2024: 15.5%), driven by improved performance in transport offset by the continued impact of supply chain challenges. Power Systems reported an operating margin of 15.3% (H1 2024: 10.3%), primarily driven by continued profitable growth in power generation, notably in data centres, and governmental. Across all divisions, our cost efficiency actions have helped to mitigate the impact of inflation. \n ·    Sustainable free cash flow growth: F ree cash flow was £1.6bn (H1 2024: £1.2bn), driven by strong operating profit and continued long-term service agreement ( LTSA) balance growth. Civil net LTSA balance growth net of risk and revenue sharing agreements (RRSAs) of £472m (H1 2024: £544m) in the period was supported by higher large engine flying hours (EFH) at 109% of 2019 levels (H1 2024: 101%) and an improved EFH rate, partly offset by higher shop visit volumes. The actions we are taking to improve LTSA contracts are driving both higher margins and stronger cash flows. \n ·    Building further resilience: As well as strengthening the balance sheet, we are delivering a more robust and less volatile free cash flow that is more resilient to the external environment. Net cash increased by £609m to £1.1bn (2024 FY: £475m). Gross debt stood at £3.5bn, of which $1.0bn matures in October 2025 and will be repaid from free cash flow, and lease liabilities were £1.4bn. Together with cash and cash equivalents of £6.0bn, we have a robust liquidity position of £8.5bn at 30 June 2025 (2024 FY: £8.1bn) . In addition, total underlying cash costs as a proportion of underlying gross margin (TCC/GM) continued to improve to 0.35x (H1 2024: 0.49x). \n ·    Growing shareholder returns: In line with our capital framework, we will pay an interim dividend per share of 4.5p in September 1 . We are making good progress with our £1bn share buyback programme for 2025, having completed £0.4bn by the end of June. Taken together, the 6p dividend per share in respect of the full year 2024, the interim dividend, and the share buyback will see us return £1.9bn to shareholders through 2025. \n   \n \n \n \n \n 1 \n \n \n 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 30 \n \n \n \n \n   \n Transformation programme and strategic initiatives \n Our strategic framework is founded on four strategic pillars. We continue to make strong progress against each of these pillars. \n ·    Portfolio choices & partnerships: \n o ČEZ Group became a shareholder in Rolls-Royce SMR in March. Alongside a commitment to buy up to six Small Modular Reactors (SMRs), ČEZ Group brings significant experience as a nuclear power plant operator with an established nuclear supply chain. \n o Rolls-Royce and Turkish Technic announced plans to establish a state-of-the-art maintenance, repair, and overhaul (MRO) facility at Istanbul Airport which will help address growing long-term aftermarket demand. This facility will be operational by the end of 2027, providing maintenance services for Trent XWB-84, Trent XWB-97, and Trent 7000 engines. \n o In Power Systems, we are continuing to invest in our next generation engine that will offer higher power density, lower emissions, and improved fuel consumption compared to its peers, and will enter into service in 2028. We are also significantly upgrading our military engines, with higher power density, to capture growing demand. \n o In July, we completed the sale of our naval propulsors business to Fairbanks Morse Defence (FMD) and we expect to close the sale of the naval handling business, also to FMD, at a later date. \n   \n ·    Advantaged businesses & strategic initiatives: \n o In Civil Aerospace, we continue to drive for improved commercial terms and lower costs across our widebody and business aviation contracts, which will deliver a significant benefit to underlying operating profit and cash flow to the mid-term and beyond. All our original equipment (OE) contracts have now been successfully renegotiated. We have also now renegotiated the most significant onerous aftermarket contracts and expect to largely conclude the remainder through 2025 and 2026. \n o Our time on wing programme, which will deliver more than an 80% improvement on average across modern Trent engines by 2027, is progressing well. We have now either delivered or secured more than half of the targeted improvement. A significant milestone achieved in the period, supporting this target, was on the Trent XWB-84 where the analysis of millions of hours of operating data will allow us to systematically raise the cycle limit of critical parts, and combined with a compressor blade modification, further increases the time on wing of this engine. The achievement of this milestone, combined with the renegotiations of onerous contracts, supported total gross contractual margin improvements of £402m in the period. \n o In June, the improved high-pressure turbine (HPT) blade for the Trent 1000 TEN, that will more than double the time on wing of the engine, was certified. We remain on track to deliver improvements for the Trent 1000 and Trent 7000 that will deliver a further 30% time on wing benefit by the end of this year. In addition, the Airbus A350-900 powered by the new Trent XWB-84EP variant, which will improve fuel consumption by more than 1% relative to the baseline engine and deliver a further time on wing benefit, entered into service in May. \n o In business aviation, the Pearl 700-powered Gulfstream G800 was certified by the FAA and EASA in April, ahead of the aircraft's entry into service later this year. On the Pearl 10X engine, for the Dassault Falcon 10X, we have successfully completed all major engine certification tests and will submit the certification reports to the regulators for approval. \n o In Defence, we were awarded a £0.5bn five-year support contract with the UK Ministry of Defence for maintenance and service of the EJ200 engine that powers the UK Royal Air Force's Typhoon aircraft. We also secured orders for Trent 7000 engines for the new upgraded Airbus MRTT+ (multi role tanker transport plus) aircraft. In addition, we signed a sustainment contract worth £1.0bn with the US Air Force for the AE 2100 engines. \n o In Power Systems, we have made focused investments in our production capacity in the US that will support continued data centre growth. Demand for our backup power generators for data centres remains very strong, and we now expect higher revenue growth, at around 20% per year to the mid-term in the power generation segment (previously 15%-17%). Our governmental business is also well positioned to capture the benefits from increased European defence spending. As a result, we now expect higher governmental revenue growth of 12%-14% per year to the mid-term, mainly driven by growth in land defence. \n   \n ·    Efficiency & Simplification: \n o Our TCC/GM ratio further improved to 0.35x. This represents a best-in-class ratio and a competitive advantage as we transform Rolls-Royce into a more resilient business. \n o We have delivered more than £450m of Efficiency & Simplification benefits since the start of 2022 and remain on track to deliver more than £500m by the end of this year. Our Efficiency & Simplification targets are supported by zero-based budgeting and our Group Business Services (GBS) strategy. GBS efficiencies are scaling up: we have opened a new GBS centre in Poland and are expanding our centre in India. \n o We have delivered more than £850m of gross third-party cost savings since the start of 2022 which has helped to partially offset inflationary pressures, and we remain on track to deliver more than £1bn by the end of this year. \n   \n ·    Lower carbon & digitally enabled businesses: \n o In June, Rolls-Royce SMR was chosen as the sole provider in the Great British Energy - Nuclear (GBEN) SMR competition to build three SMR units in the UK. Contractual terms are expected to be finalised in the fourth quarter of 2025, resulting in a two-stage contract that will see the first SMR connected to the grid by the mid-2030s. This project will start to generate revenues and profit from late 2025 onwards, with positive cash flows throughout. We expect Rolls-Royce SMR to be profitable and free cash flow positive by 2030. We continue to see significant international interest in Rolls-Royce SMRs, including in Sweden where we have been shortlisted as one of two potential SMR providers by Vattenfall. \n o In Power Systems, our battery energy storage systems (BESS) business has won major orders, including for the Ignitis Group in Lithuania, which are supporting strong revenue growth and our ambition to achieve breakeven performance in the near-term. \n o We are increasingly adopting Artificial Intelligence (AI) across the Group as part of our digital strategy. We are testing our own Generative AI platform for a variety of use cases including accelerating new product introductions and more efficient MRO processes. We are also working to provide greater transparency across our supply chain through digital, data and AI. \n o Our Engine Health Monitoring (EHM) has moved to the cloud for key widebody and business aviation engines. This offers improved performance, scalability, and resilience as well as advanced AI capabilities that can be used for improvements in engine performance. \n   \n These strategic initiatives are continuing to expand the earnings and cash potential of the business. \n Outlook and 2025 guidance \n A strong first half delivery gives us confidence to raise our full year 2025 guidance, despite a challenging and uncertain external environment. This reflects the continued execution of our strategic initiatives, notably commercial optimisation and cost efficiencies. \n \n \n \n \n 2025 financial guidance \n \n \n Updated \n \n \n Previous \n \n \n \n \n Underlying operating profit \n \n \n £3.1bn-£3.2bn \n \n \n £2.7bn-£2.9bn \n \n \n \n \n Free cash flow \n \n \n £3.0bn-£3.1bn \n \n \n £2.7bn-£2.9bn \n \n \n \n \n Operating profit guidance for the full year 2025 now stands at £3.1bn-£3.2bn. Compared to an operating profit of £1.7bn in the first half, we expect a slightly lower delivery in the second half of 2025 due to a lower contribution from net contractual margin improvements (H1 2025: £288m), an increased number of OE deliveries and higher MRO investment related costs in Civil Aerospace. \n Free cash flow guidance for the full year 2025 now stands at £3.0bn-£3.1bn. We expect a slightly lower free cash flow in the second half compared to the first half of 2025. This reflects a slightly lower operating profit in the second half of the year, alongside an increased number of large engine major shop visits with a significant increase in Trent 1000 major shop visits. Investments across the Group will also be higher in the second half as we continue to support growth to the mid-term and beyond. \n As guided in February, our free cash flow guidance for full year 2025 still includes a £150-200m cash impact related to the aerospace supply chain. Our actions have resulted in some improvements in parts availability across the supply chain. However, we anticipate challenges to persist through 2025 and 2026. \n Our guidance assumes Civil net LTSA creditor growth at the low end of the range of £0.8bn-£1.2bn. In Civil Aerospace, we continue to expect large EFH in the range of 110-115% of 2019 levels and 1,400-1,500 total shop visits. We now expect total OE deliveries at the low end of the 540-570 range. \n     \n Mid-term targets \n We are making good progress towards our mid-term targets, which were set in February 2025 and are based on a 2028 timeframe. These mid-term targets remain significantly underpinned by our actions, investments, and strategic initiatives, including the benefits of efficiency and simplification across the Group. The performance improvements that underpin these targets and the actions required to deliver them are owned across the Group and supported by rigorous performance management. \n   \n \n \n \n \n   \n \n \n Mid-term targets (2028) \n \n \n \n \n Group targets: \n \n \n \n \n \n \n \n Underlying operating profit \n \n \n £3.6bn-£3.9bn \n \n \n \n \n Underlying operating margin \n \n \n 15%-17% \n \n \n \n \n Free cash flow \n \n \n £4.2bn-£4.5bn \n \n \n \n \n Return on capital \n \n \n 18%-21% \n \n \n \n \n \n \n \n \n \n \n \n \n Divisional margin targets: \n \n \n \n \n \n \n \n Civil Aerospace \n \n \n 18%-20% \n \n \n \n \n Defence \n \n \n 14%-16% \n \n \n \n \n Power Systems \n \n \n 14%-16% \n \n \n \n \n We continue to see our mid-term targets as a milestone, not a destination, and we see strong growth prospects beyond the mid-term across the Group. \n   \n Financial performance by business \n \n \n \n \n £ million \n \n \n Underlying revenue \n \n \n Organic change 1 \n \n \n Underlying operating profit/(loss) \n \n \n Organic change 1 \n \n \n Underlying operating margin \n \n \n Organic margin change 1 \n \n \n \n \n Civil Aerospace \n \n \n 4,786 \n \n \n 17% \n \n \n 1,193 \n \n \n 63% \n \n \n 24.9% \n \n \n 7.1pt \n \n \n \n \n Defence \n \n \n 2,223 \n \n \n 1% \n \n \n 342 \n \n \n 0% \n \n \n 15.4% \n \n \n (0.2)pt \n \n \n \n \n Power Systems \n \n \n 2,042 \n \n \n 20% \n \n \n 313 \n \n \n 89% \n \n \n 15.3% \n \n \n 5.6pt \n \n \n \n \n All Other Businesses 2 \n \n \n 6 \n \n \n nm 3 \n \n \n (78) \n \n \n nm 3 \n \n \n nm 3 \n \n \n nm 3 \n \n \n \n \n Corporate/eliminations \n \n \n - \n \n \n nm 3 \n \n \n (37) \n \n \n 6% \n \n \n nm 3 \n \n \n nm 3 \n \n \n \n \n Total \n \n \n 9,057 \n \n \n 13% \n \n \n 1,733 \n \n \n 50% \n \n \n 19.1% \n \n \n 4.9pt \n \n \n \n \n   \n Trading cash flow \n \n \n \n \n £ million \n \n \n H1 2025 \n \n \n H1 2024 \n \n \n \n \n Civil Aerospace \n \n \n 1,111 \n \n \n 1,038 \n \n \n \n \n Defence \n \n \n 327 \n \n \n 234 \n \n \n \n \n Power Systems \n \n \n 425 \n \n \n 121 \n \n \n \n \n All Other Businesses 2 \n \n \n 17 \n \n \n (71) \n \n \n \n \n Corporate/eliminations \n \n \n (33) \n \n \n (33) \n \n \n \n \n Total trading cash flow \n \n \n 1,847 \n \n \n 1,289 \n \n \n \n \n Underlying operating profit charge exceeded by contributions to defined benefit schemes \n \n \n (6) \n \n \n (18) \n \n \n \n \n Taxation \n \n \n (259) \n \n \n (113) \n \n \n \n \n Total free cash flow \n \n \n 1,582 \n \n \n 1,158 \n \n \n \n \n     \n \n \n \n \n 1 \n \n \n Organic change is the measure of change at constant translational currency applying full year 2024 average rates to 2024 and 2025 and excludes M&A and business closures. All underlying income statement commentary is provided on an organic basis unless otherwise stated \n \n \n \n \n 2 \n \n \n All Other Businesses include the financial results of Rolls-Royce SMR (also referred to as Rolls-Royce SMR Limited), electrical power solutions and the UK Civil Nuclear business (see note 2 for further details) \n \n \n \n \n 3 \n \n \n nm is defined as not meaningful \n \n \n \n \n   \n Civil Aerospace \n \n \n \n \n H1 2025 key Civil Aerospace operational metrics: \n \n \n Large engine \n \n \n Business aviation/ regional \n \n \n Total \n \n \n Change \n \n \n \n \n OE deliveries \n \n \n 122 \n \n \n 115 \n \n \n 237 \n \n \n 1 \n \n \n \n \n LTSA engine flying hours (millions) \n \n \n 8.1 \n \n \n 1.5 \n \n \n 9.6 \n \n \n 0.6 \n \n \n \n \n Total LTSA shop visits \n \n \n 494 \n \n \n 202 \n \n \n 696 \n \n \n 72 \n \n \n \n \n …of which major shop visits \n \n \n 217 \n \n \n 189 \n \n \n 406 \n \n \n 12 \n \n \n \n \n   \n Significantly improved Civil Aerospace operating profit reflects strong large engine aftermarket performance, across both LTSA and time and materials, net contractual margin improvements, and higher spare engine profit. \n In the first half of 2025, a total of 349 large engines were ordered (H1 2024: 273) with a gross book-to-bill of 2.9x (H1 2024: 2.3x). The Trent XWB-97 and Trent 7000 were our bestselling engines in the period, with 163 and 148 orders, respectively. Significant new orders included Riyadh Air, Vietjet Air, STARLUX and AviLease. As a result of strong order inflow, our large engine order book increased by 12% and now stands at 2,056 engines at the end of June 2025. \n Total OE deliveries of 237 engines were broadly similar to the prior period (H1 2024: 236), with 115 business aviation deliveries (H1 2024: 116) and 122 total large engine deliveries (H1 2024: 120). In the first half of 2025 we delivered 23 large spare engines (H1 2024: 21), which represented 19% of total large engine deliveries (H1 2024: 18%). Total shop visits increased by 12% versus the prior period to 696 (H1 2024: 624); of these 217 were large engine major shop visits (H1 2024: 195). \n Underlying revenue of £4.8bn increased 17%, driven by higher shop visit volumes and commercial optimisation. Underlying OE revenue grew by 12% in the period to £1.5bn and services revenue grew by 19% to £3.3bn. LTSA revenue catch-ups were £126m (H1 2024: £258m). \n Underlying operating profit was £1.2bn (24.9% margin) versus £740m in H1 2024 (18.0% margin). The significant increase in operating profit was driven by stronger large engine aftermarket performance, with higher LTSA volumes and margins alongside increased time and materials profit, a larger contribution from contractual margin improvements, and improved spare engine profits. \n Our efforts to improve the commercial terms and reduce costs across our large engine and business aviation contracts supported gross contractual margin improvements of £402m. These were primarily driven by the continued successful renegotiation of onerous contracts in the period, alongside the achievement of key time on wing milestones on the Trent XWB-84. \n These benefits were partially offset by £114m of additional charges associated with the impact of prolonged supply chain challenges, which were booked across onerous provisions and contract catch-ups. As a result, net contractual margin improvements were £288m (H1 2024: £223m), comprising contract catch-ups of £107m (H1 2024: £216m) and onerous provision releases of £181m (H1 2024: £7m). \n Trading cash flow of £1.1bn was slightly higher than the prior period (H1 2024: £1.0bn). Cash flow in the period was largely driven by operating profit alongside continued net LTSA balance growth. LTSA balance growth net of RRSAs of £472m (H1 2024: £544m) was supported by continued EFH growth, a higher normalised EFH rate due to our commercial actions, with LTSA invoiced flying hour receipts of £3.0bn (H1 2024: £2.9bn). This was offset by an increased number of shop visits. Large EFH rose by 8% versus the prior period to 109% of 2019 levels, driven primarily by new aircraft deliveries. Business aviation and regional EFH were broadly unchanged in the period. \n   \n Defence \n Operating profit was similar to the prior period, with improved performance in transport offset by the absence of a one-off benefit in submarines and the impact of continued supply chain challenges. \n Demand remains high, with an order intake of £4.0bn and a book-to-bill ratio of 1.8x. Combat and transport order intake was particularly strong, and with improved profitability. Order backlog now stands at £18.8bn, equivalent to around four years of revenue, with order cover approaching 100% for the remainder of 2025. \n Revenues of £2.2bn were flat compared to the prior period 1 . Transport revenues grew by 29%, with strong growth across both OE and aftermarket. This was offset by lower submarines revenues 1 , which fell by 19% due to the absence of a one-off benefit in the prior period of £180m. Key milestones in the period included the first engine delivery for the MQ-25 programme and the first MV-75 FLRAA engine entering development testing. \n Operating profit was £342m (15.4% margin) compared to £345m (15.5% margin) in the prior period. This reflects improved performance in transport, across both OE and aftermarket, offset by the absence of the submarines one-off benefit in the prior period and the continued impact of supply chain constraints, notably in naval. \n Trading cash flow was £327m compared to £234m in the prior period, with a similar operating profit alongside an improved working capital performance. \n Power Systems \n In Power Systems, significantly improved operating profit and margins primarily reflects profitable growth in both power generation, driven by data centres, and governmental. \n Order intake was £2.9bn with a book-to-bill ratio of 1.4x. This represents a 32% increase compared to the prior period, driven by strong power generation demand where order intake rose by 68%, which included an 85% year on year increase in data centre orders. As a result of strong order intake, the order backlog now stands at a record level, with OE order coverage of 100% for the remainder of 2025 and 43% for 2026. Order coverage ratios are high relative to history, with increased coverage in both power generation and governmental. \n Underlying revenue was £2.0bn, an increase of 20% versus the prior period. Power generation revenue growth was 26%, including data centre revenue growth of 45%. Governmental revenue growth was 19%, driven by higher demand in land defence and services. Underlying OE revenues grew by 21% to £1.4bn. Underlying services revenue grew by 17% to £661m. \n Underlying operating profit grew by 89% to £313m. Underlying operating margin rose by 5.6pts to 15.3% (H1 2024: 10.3%). The increase in underlying operating profit reflects profitable growth in power generation, driven by data centres, governmental growth, and improved BESS profitability. \n Trading cash flow was £425m with a conversion ratio of 136% versus £121m and 64% last year. The increase in trading cash flow was mainly due to higher operating profit alongside an improved working capital performance, reflecting the benefits or our working capital initiatives alongside some timing benefits associated with customer advances in H1 2025.   \n \n \n \n \n 1 \n \n \n Defence revenues in H1 2024 included a £180m benefit of a one-off capital and lease transaction. Excluding this, Defence revenues in H1 2025 grew 10%, submarine revenues grew 6% \n \n \n \n \n \n Statutory and underlying Group financial performance \n \n \n \n \n   \n \n \n H1 2025 \n \n \n H1 2024 \n \n \n \n \n £ million \n \n \n Statutory \n \n \n Impact of hedge book 1 \n \n \n Impact of acquisition accounting \n \n \n Impact of other non-underlying items \n \n \n Underlying \n \n \n Underlying \n \n \n \n \n Revenue \n \n \n 9,490 \n \n \n (433) \n \n \n - \n \n \n - \n \n \n 9,057 \n \n \n 8,182 \n \n \n \n \n Gross profit \n \n \n 2,927 \n \n \n (102) \n \n \n 7 \n \n \n (260) \n \n \n 2,572 \n \n \n 1,977 \n \n \n \n \n Operating profit \n \n \n 2,074 \n \n \n (102) \n \n \n 8 \n \n \n (247) \n \n \n 1,733 \n \n \n 1,149 \n \n \n \n \n Gain arising on disposal of businesses \n \n \n 679 \n \n \n - \n \n \n - \n \n \n (679) \n \n \n - \n \n \n - \n \n \n \n \n Profit before financing and taxation \n \n \n 2,753 \n \n \n (102) \n \n \n 8 \n \n \n (926) \n \n \n 1,733 \n \n \n 1,149 \n \n \n \n \n Net financing income/(costs) \n \n \n 2,088 \n \n \n (2,163) \n \n \n - \n \n \n 31 \n \n \n (44) \n \n \n (114) \n \n \n \n \n Profit before taxation \n \n \n 4,841 \n \n \n (2,265) \n \n \n 8 \n \n \n (895) \n \n \n 1,689 \n \n \n 1,035 \n \n \n \n \n Taxation \n \n \n (433) \n \n \n 572 \n \n \n (2) \n \n \n (230) \n \n \n (93) \n \n \n (298) \n \n \n \n \n Profit for the period \n \n \n 4,408 \n \n \n (1,693) \n \n \n 6 \n \n \n (1,125) \n \n \n 1,596 \n \n \n 737 \n \n \n \n \n Basic earnings per share (pence) 2 \n \n \n 52.38 \n \n \n   \n \n \n   \n \n \n   \n \n \n 15.74 \n \n \n 8.95 \n \n \n \n \n Revenue : Underlying revenue of £9.1bn was up 13%, with strong growth in Civil Aerospace and Power Systems. Statutory revenue of £9.5bn was 7% 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 2025: GBP:USD 1.30; H1 2024: GBP:USD 1.27) and underlying revenue being measured at the hedge book achieved rate during the period (H1 2025 GBP:USD 1.44; H1 2024:GBP:USD 1.48). \n Operating profit : Underlying operating profit of £1.7bn (19.1% margin) versus £1.1bn (14.0% margin) in the prior period. The largest increase in underlying operating profit was in Civil Aerospace, driven by strong large engine aftermarket performance, contractual margin improvements and higher spare engine profit. Power Systems delivered significantly higher profit as a result of continued profitable growth in power generation, notably in data centres, and governmental. Statutory operating profit was £2.1bn, higher than the £1.7bn underlying operating profit due to a £102m negative impact from currency hedges in the underlying results, and items excluded from the underlying results, being: £8m relating to the amortisation of intangible assets arising on previous acquisitions; £247m of other non-underlying items comprising a £185m impairment reversal related to a Civil Aerospace programme asset impairment previously recorded, £83m onerous provision release, and charges relating to transformation and restructuring costs of £21m. \n Gain arising on disposal of businesses: During the period, ČEZ Group made a strategic investment into Rolls-Royce SMR. As a result, Rolls-Royce SMR was deconsolidated as it transitioned from a subsidiary to an equity-accounted investment, resulting in a profit on disposal of the subsidiary of £679m. \n Profit before taxation : Underlying profit before taxation of £1.7bn included £(44)m net financing costs comprising £147m interest receivable, £(125)m interest payable and £(66)m of other financing charges and costs of undrawn facilities. Statutory profit before tax of £4.8bn included £1.6bn net fair value gains on derivative contracts, net foreign exchange gains of £529m, £(64)m other financing charges, costs of undrawn facilities and pension scheme financing and £(11)m net interest payable. \n Taxation : Underlying tax charge of £(93)m (H1 2024: £(298)m) reflects an overall tax charge on profits of Group companies, offset by a tax credit of £31m relating to utilisation of a previously unrecognised deferred tax asset on UK tax losses against profits in the period, and a further £277m relating to recognition of a previously unrecognised deferred tax asset on UK tax losses. These are reflected in the statutory tax charge of £(433)m (H1 2024: £(280)m) which also includes a further tax credit of £286m on recognition of a previously unrecognised deferred tax asset on UK tax losses, a £170m tax credit relating to the deconsolidation of Rolls-Royce SMR from the Group, and a £13m tax credit relating to other non-underlying items. \n \n     \n \n \n \n \n 1 \n \n \n 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 \n \n \n \n \n 2 \n \n \n In H1 2025, the underlying profit attributable to ordinary shareholders has been adjusted for the one-off non-cash impact of £277m related to the recognition of deferred tax assets on UK tax losses, see note 5, page 29 for further details \n \n \n \n \n \n \n Free cash flow \n \n \n \n \n \n \n \n H1 2025 \n \n \n H1 2024 \n \n \n \n \n £ million \n \n \n Cash flow \n \n \n Impact of hedge book \n \n \n Impact of acquisition accounting \n \n \n Impact of other non-underlying items \n \n \n Funds flow \n \n \n Funds flow \n \n \n \n \n Operating profit \n \n \n 2,074 \n \n \n (102) \n \n \n 8 \n \n \n (247) \n \n \n 1,733 \n \n \n 1,149 \n \n \n \n \n Depreciation, amortisation and impairment \n \n \n 256 \n \n \n - \n \n \n (8) \n \n \n 185 \n \n \n 433 \n \n \n 427 \n \n \n \n \n Movement in provisions \n \n \n (395) \n \n \n (8) \n \n \n - \n \n \n 109 \n \n \n (294) \n \n \n (106) \n \n \n \n \n Movement in Civil Aerospace LTSA balance \n \n \n 440 \n \n \n 1 \n \n \n - \n \n \n - \n \n \n 441 \n \n \n 715 \n \n \n \n \n Movement in RRSA prepayments for LTSA parts \n \n \n 46 \n \n \n (15) \n \n \n - \n \n \n - \n \n \n 31 \n \n \n (171) \n \n \n \n \n Movement in cost to obtain contracts \n \n \n (48) \n \n \n - \n \n \n - \n \n \n - \n \n \n (48) \n \n \n 7 \n \n \n \n \n Settlement of excess derivatives \n \n \n (116) \n \n \n - \n \n \n - \n \n \n - \n \n \n (116) \n \n \n (75) \n \n \n \n \n Interest received \n \n \n 150 \n \n \n - \n \n \n - \n \n \n - \n \n \n 150 \n \n \n 124 \n \n \n \n \n Other operating cash flows \n \n \n 64 \n \n \n - \n \n \n - \n \n \n   \n \n \n 64 \n \n \n (10) \n \n \n \n \n Operating cash flow before working capital and income tax \n \n \n 2, 471 \n \n \n (124) \n \n \n - \n \n \n 47 \n \n \n 2, 394 \n \n \n 2,060 \n \n \n \n \n Working capital 1 \n \n \n 226 \n \n \n (247) \n \n \n - \n \n \n (1) \n \n \n (22) \n \n \n (228) \n \n \n \n \n Cash flows on other financial assets and liabilities held for operating purposes \n \n \n (389) \n \n \n 358 \n \n \n - \n \n \n - \n \n \n (31) \n \n \n (5) \n \n \n \n \n Income tax \n \n \n (290) \n \n \n - \n \n \n - \n \n \n 31 \n \n \n (259) \n \n \n (113) \n \n \n \n \n Cash from operating activities \n \n \n 2,018 \n \n \n (13) \n \n \n - \n \n \n 77 \n \n \n 2, 082 \n \n \n 1,714 \n \n \n \n \n Capital element of lease payments \n \n \n (91) \n \n \n 13 \n \n \n - \n \n \n - \n \n \n (78) \n \n \n (112) \n \n \n \n \n Capital expenditure \n \n \n (349) \n \n \n - \n \n \n - \n \n \n - \n \n \n (349) \n \n \n (291) \n \n \n \n \n Cash received on maturity of share based payment schemes \n \n \n 38 \n \n \n - \n \n \n - \n \n \n - \n \n \n 38 \n \n \n - \n \n \n \n \n Investments \n \n \n 31 \n \n \n - \n \n \n - \n \n \n - \n \n \n 31 \n \n \n 17 \n \n \n \n \n Interest paid \n \n \n (136) \n \n \n - \n \n \n - \n \n \n - \n \n \n (136) \n \n \n (157) \n \n \n \n \n Other \n \n \n 71 \n \n \n - \n \n \n - \n \n \n (77) \n \n \n (6) \n \n \n (13) \n \n \n \n \n Free cash flow \n \n \n 1,582 \n \n \n - \n \n \n - \n \n \n - \n \n \n 1,582 \n \n \n 1,158 \n \n \n \n \n Free cash flow in the period was £1.6bn, an improvement of £0.4bn compared with the prior period driven by: \n Underlying operating profit of £1.7bn, £0.6bn higher than the prior period. This reflects higher underlying operating profit in Civil Aerospace and Power Systems , driven by our strategic initiatives, including commercial optimisation and cost efficiency benefits. \n Movement in provisions of £(294)m driven by utilisation across several provisions held, including onerous contracts, warranty and guarantees, transformation and restructuring. \n Movement in Civil LTSA balance was £441m, driven by continued EFH growth and a higher normalised EFH rate due to our commercial actions, offset by an increased number of shop visits. \n Movements in prepayments to RRSAs for LTSA parts of £31m (H1 2024: £(171)m) arises as amounts recognised in the income statement (as parts supplied by RRSA partners are used) have been in excess of payments to RRSA partners in the period, where the RRSA partner receives a share of the cashflows the Group has received from its customers. \n Interest received of £150m, £26m higher than the prior period. This reflects a higher average cash balance through the period. \n Other operating cash flows of £64m include share of results and dividends received from joint ventures and associates, flows relating to our defined benefit post-retirement schemes, and share based payments. \n Working capital outflows of £(22)m, compared to £(228)m in the prior period. A net inflow of £586m from receivables, payables and contract liabilities reflecting the benefits from our working capital initiatives was offset by a £(608)m increase in inventories to meet demand across the Group. \n   \n \n \n \n \n 1 \n \n \n 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) \n \n \n \n \n   \n Income tax of £(259)m , net cash tax payments for the first half of 2025 were higher than the prior period of £(113)m due to higher profit and some timing impacts, including final payments made in respect of the prior year. \n Capital expenditure of £(349)m , includes £(202)m of property, plant and equipment additions and £(167)m of intangibles additions. The combined additions were higher than the prior period as a result of investment in R&D, technology and site improvements across the Group. \n Interest paid of £(136)m , including lease interest payments, is £21m lower than the prior period. The reduction in interest charges is across interest paid, interest element of lease payments and fees paid on undrawn facilities. \n Balance Sheet \n \n \n \n \n £ million \n \n \n 30 June 2025 \n \n \n 31 December 2024 \n \n \n Change \n \n \n \n \n Intangible assets \n \n \n 4,488 \n \n \n 4,402 \n \n \n 86 \n \n \n \n \n Property, plant and equipment \n \n \n 3,732 \n \n \n 3,724 \n \n \n 8 \n \n \n \n \n Right-of-use assets \n \n \n 785 \n \n \n 761 \n \n \n 24 \n \n \n \n \n Joint ventures and associates \n \n \n 1,244 \n \n \n 592 \n \n \n 652 \n \n \n \n \n Civil Aerospace LTSA 1 \n \n \n (10,693) \n \n \n (10,184) \n \n \n (509) \n \n \n \n \n RRSA prepayments for parts 1 \n \n \n 1,836 \n \n \n 1,668 \n \n \n 168 \n \n \n \n \n Costs to obtain contracts 1 \n \n \n 183 \n \n \n 135 \n \n \n 48 \n \n \n \n \n Working capital 1 \n \n \n (1,816) \n \n \n (1,731) \n \n \n (85) \n \n \n \n \n Provisions \n \n \n (1,617) \n \n \n (1,994) \n \n \n 377 \n \n \n \n \n Net cash 2 \n \n \n 1,084 \n \n \n 475 \n \n \n 609 \n \n \n \n \n Net financial assets and liabilities 2 \n \n \n 75 \n \n \n (1,980) \n \n \n 2,055 \n \n \n \n \n Net post-retirement scheme deficits \n \n \n (192) \n \n \n (191) \n \n \n (1) \n \n \n \n \n Taxation \n \n \n 3,249 \n \n \n 3,383 \n \n \n (134) \n \n \n \n \n Assets and liabilities held for sale 3 \n \n \n 69 \n \n \n 53 \n \n \n 16 \n \n \n \n \n Other net assets and liabilities \n \n \n 7 \n \n \n 6 \n \n \n 1 \n \n \n \n \n Net assets/(liabilities) \n \n \n 2,434 \n \n \n (881) \n \n \n 3,315 \n \n \n \n \n Other items \n \n \n \n \n \n \n \n \n \n \n \n \n \n US$ hedge book (US$bn) \n \n \n 21 \n \n \n 19 \n \n \n \n \n \n \n \n Key drivers of balance sheet movements were: \n Joint ventures and associates: The £0.7bn increase was largely a result of Rolls-Royce SMR being recognised at its fair value as an equity-accounted investment following the strategic investment by ČEZ Group (ČEZ) in Rolls-Royce SMR during the period. \n Civil LTSA: The £(509)m movement in the net liability balance was mainly driven by an increase in invoiced LTSA receipts exceeding revenue recognised in the period. \n Working capital : The £(1.8)bn net working capital position increased by £(85)m compared to the prior period. The movement comprised an increase in contract liabilities of £(495)m and £(109)m increase in net payables due to changes in operational volumes and timing of supplier payments. This was partly offset by a £519m increase in inventory reflecting higher sales volumes. \n Provisions : The £377m net reduction in provisions was due to onerous contract loss reversals and utilisation being greater than onerous contract loss charges in the period, supported by continued efforts to renegotiate our most significant onerous contracts. \n Net cash : Increased from £475m to £1.1bn driven by a free cash inflow of £1.6bn. Our liquidity position is strong with £8.5bn of liquidity including cash and cash equivalents of £6.0bn and undrawn facilities of £2.5bn. Net cash included £(1.4)bn of lease liabilities (2024 FY: £(1.6)bn). \n \n \n \n \n 1 \n \n \n 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 \n \n \n \n \n 2 \n \n \n Net cash includes £(50)m (2024: £33m) 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 \n \n \n \n \n 3 \n \n \n Assets and liabilities held for sale relate to the sale of the naval propulsors & handling business \n \n \n \n \n Net financial assets and liabilities : A £2.1bn increase in the net financial assets primarily driven by fair value gains on foreign exchange and commodity contracts due to the impact of the movement in GBP:USD exchange rates. \n Taxation : The net tax asset reduced by £(134)m to £3.2bn. The decrease primarily relates to a £(502)m reduction in deferred tax related to foreign exchange derivatives, which moved from a net financial liability to a net financial asset position, and a £(200)m reduction in deferred tax assets driven by a reactivation of previously disallowed interest and asset impairment reversals. These are partly offset by the recognition of a £563m deferred tax asset relating to UK tax losses that was previously not recognised. Deferred tax liabilities have decreased by £7m. \n   \n Results meeting and webcast \n 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-and-events.aspx \n   \n To register for the webcast, including Q&A partici pation, please visit the following link: \n https://app.webinar.net/bmy0V0Qnd1o \n   \n 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 \n Enquiries: \n   \n \n \n \n \n Investors : \n \n \n \n \n \n \n \n \n Media : \n \n \n \n \n \n \n \n Jeremy Bragg \n Ruchi Malaiya \n   \n \n \n +44 7795 840875 \n +44 7900 189184 \n \n \n \n \n \n Richard Wray \n \n \n +44 7810 850055 \n \n \n \n \n   \n 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. \n 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. \n   \n LSE: RR.; ADR: RYCEY; LEI: 213800EC7997ZBLZJH69 \n \n Condensed Consolidated Interim Financial Statements \n Condensed consolidated income statement \n For the half-year ended 30 June 2025 \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n Half-year to 30 June 2025 \n \n \n Half-year to \n30 June 2024 \n \n \n \n \n \n \n \n \n \n \n   \n \n \n Notes \n \n \n £m  \n \n \n £m \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Revenue \n \n \n \n \n \n   \n \n \n 2 \n \n \n 9,490 \n \n \n 8,861 \n \n \n   \n \n \n \n \n Cost of sales 1,2 \n \n \n \n \n \n   \n \n \n \n \n \n (6,563) \n \n \n (6,753) \n \n \n   \n \n \n \n \n Gross profit \n \n \n \n \n \n   \n \n \n 2 \n \n \n 2,927 \n \n \n 2,108 \n \n \n   \n \n \n \n \n Commercial and administrative costs \n \n \n \n \n \n   \n \n \n 2 \n \n \n (631) \n \n \n (641) \n \n \n   \n \n \n \n \n Research and development 2 \n \n \n \n \n \n   \n \n \n 2, 3 \n \n \n (246) \n \n \n 101 \n \n \n   \n \n \n \n \n Share of results of joint ventures and associates \n \n \n \n \n \n   \n \n \n \n \n \n 24 \n \n \n 78 \n \n \n   \n \n \n \n \n Operating profit \n \n \n \n \n \n   \n \n \n \n \n \n 2,074 \n \n \n 1,646 \n \n \n   \n \n \n \n \n Gain arising on disposal of business 3 \n \n \n \n \n \n   \n \n \n 20 \n \n \n 679 \n \n \n - \n \n \n   \n \n \n \n \n Profit before financing and taxation \n \n \n \n \n \n   \n \n \n \n \n \n 2,753 \n \n \n 1,646 \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Financing income \n \n \n \n \n \n   \n \n \n 4 \n \n \n 2,342 \n \n \n 306 \n \n \n   \n \n \n \n \n Financing costs \n \n \n \n \n \n   \n \n \n 4 \n \n \n (254) \n \n \n (536) \n \n \n   \n \n \n \n \n Net financing income/(costs) 4 \n \n \n \n \n \n   \n \n \n \n \n \n 2,088 \n \n \n (230) \n \n \n   \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Profit before taxation \n \n \n \n \n \n   \n \n \n \n \n \n 4,841 \n \n \n 1,416 \n \n \n   \n \n \n \n \n Taxation \n \n \n \n \n \n   \n \n \n 5 \n \n \n (433) \n \n \n (280) \n \n \n   \n \n \n \n \n Profit for the period \n \n \n \n \n \n   \n \n \n \n \n \n 4,408 \n \n \n 1,136 \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Attributable to: \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Ordinary shareholders \n \n \n \n \n \n   \n \n \n \n \n \n 4,416 \n \n \n 1,149 \n \n \n   \n \n \n \n \n Non-controlling interests (NCI) \n \n \n \n \n \n   \n \n \n \n \n \n (8) \n \n \n (13) \n \n \n   \n \n \n \n \n Profit for the period \n \n \n \n \n \n   \n \n \n \n \n \n 4,408 \n \n \n 1,136 \n \n \n   \n \n \n \n \n Other comprehensive (expense)/ income (OCI) \n \n \n \n \n \n   \n \n \n \n \n \n (330) \n \n \n 123 \n \n \n   \n \n \n \n \n Total comprehensive income for the period \n \n \n \n \n \n   \n \n \n \n \n \n 4,078 \n \n \n 1,259 \n \n \n   \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Earnings per ordinary share attributable to ordinary shareholders: \n \n \n \n \n \n   \n \n \n 6 \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Basic \n \n \n \n \n \n   \n \n \n \n \n \n 52.38p \n \n \n 13.71p \n \n \n   \n \n \n \n \n Diluted \n \n \n \n \n \n   \n \n \n \n \n \n 52.15p \n \n \n 13.63p \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 1    Cost of sales includes a net release for expected credit losses of £13m (30 June 2024: £19m charge). Further details can be found in note 11 \n 2   In the period ended 30 June 2025, the impact of an exceptional impairment reversal was included within both cost of sales, £176m (30 June 2024: £132m), and research and development, £9m (30 June 2024: £413m). Further details can be found in notes 2 and 8 \n 3   An exceptional gain on disposal was recognised as a result of the deconsolidation of Rolls-Royce SMR Limited during the period. Further details can be found in note 20 \n 4   Included within net financing are fair value changes on derivative contracts. Further details can be found in notes 2, 4 and 15 \n   \n Condensed consolidated statement of comprehensive income \n For the half-year ended 30 June 2025 \n \n \n \n \n \n \n \n \n \n \n Half-year to 30 June 2025 \n \n \n Half-year to 30 June 2024 \n \n \n \n \n \n \n \n Notes \n \n \n £m \n \n \n £m \n \n \n \n \n Profit for the period \n \n \n   \n \n \n 4,408 \n \n \n 1,136 \n \n \n \n \n Other comprehensive (expense)/income (OCI) \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n    Actuarial movements in post-retirement schemes \n \n \n 17 \n \n \n (20) \n \n \n 124 \n \n \n \n \n    Revaluation to fair value of other investments \n \n \n \n \n \n 1 \n \n \n (3) \n \n \n \n \n    Share of OCI of joint ventures and associates \n \n \n \n \n \n (1) \n \n \n (6) \n \n \n \n \n    Related tax movements \n \n \n \n \n \n 9 \n \n \n 35 \n \n \n \n \n Items that will not be reclassified to profit or loss \n \n \n \n \n \n (11) \n \n \n 150 \n \n \n \n \n    \n \n \n \n \n \n   \n \n \n \n \n \n \n \n    Foreign exchange translation differences on foreign operations \n \n \n \n \n \n (296) \n \n \n (24) \n \n \n \n \n NCI disposed through disposal of business \n \n \n 20 \n \n \n (23) \n \n \n - \n \n \n \n \n    Movement on fair values charged to cash flow hedge reserve \n \n \n \n \n \n (58) \n \n \n (16) \n \n \n \n \n    Reclassified to income statement from cash flow hedge reserve \n \n \n \n \n \n 51 \n \n \n 15 \n \n \n \n \n Share of OCI of joint ventures and associates \n \n \n \n \n \n 5 \n \n \n (2) \n \n \n \n \n Related tax movements \n \n \n \n \n \n 2 \n \n \n - \n \n \n \n \n Items that will be reclassified to profit or loss \n \n \n \n \n \n (319) \n \n \n (27) \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Total other comprehensive (expense)/ income \n \n \n   \n \n \n (330) \n \n \n 123 \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Total comprehensive income for the period \n \n \n   \n \n \n 4,078 \n \n \n 1,259 \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Attributable to: \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Ordinary shareholders \n \n \n   \n \n \n 4,109 \n \n \n 1,272 \n \n \n \n \n NCI \n \n \n   \n \n \n (31) \n \n \n (13) \n \n \n \n \n Total comprehensive income for the period \n \n \n   \n \n \n 4,078 \n \n \n 1,259 \n \n \n \n \n \n \n   \n Condensed consolidated balance sheet \n At 30 June 2025 \n \n \n \n \n \n \n \n \n \n \n 30 June \n 2025 \n \n \n 31 December 2024 \n \n \n \n \n \n \n \n Notes \n \n \n £m \n \n \n £m \n \n \n \n \n ASSETS \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Intangible assets \n \n \n 8 \n \n \n 4,488 \n \n \n 4,402 \n \n \n \n \n Property, plant and equipment \n \n \n 9 \n \n \n 3,732 \n \n \n 3,724 \n \n \n \n \n Right-of-use assets \n \n \n 10 \n \n \n 785 \n \n \n 761 \n \n \n \n \n Investments - joint ventures and associates 1 \n \n \n \n \n \n 1,244 \n \n \n 592 \n \n \n \n \n Investments - other \n \n \n \n \n \n 6 \n \n \n 5 \n \n \n \n \n Other financial assets \n \n \n 15 \n \n \n 777 \n \n \n 126 \n \n \n \n \n Deferred tax assets \n \n \n \n \n \n 3,475 \n \n \n 3,660 \n \n \n \n \n Post-retirement scheme surpluses \n \n \n 17 \n \n \n 750 \n \n \n 790 \n \n \n \n \n Non-current assets \n \n \n \n \n \n 15,257 \n \n \n 14,060 \n \n \n \n \n Inventories \n \n \n \n \n \n 5,611 \n \n \n 5,092 \n \n \n \n \n Trade receivables and other assets \n \n \n 11 \n \n \n 8,717 \n \n \n 8,713 \n \n \n \n \n Contract assets \n \n \n 12 \n \n \n 1,703 \n \n \n 1,813 \n \n \n \n \n Taxation recoverable \n \n \n \n \n \n 51 \n \n \n 71 \n \n \n \n \n Other financial assets \n \n \n 15 \n \n \n 400 \n \n \n 209 \n \n \n \n \n Cash and cash equivalents \n \n \n \n \n \n 6,044 \n \n \n 5,575 \n \n \n \n \n Current assets \n \n \n \n \n \n 22,526 \n \n \n 21,473 \n \n \n \n \n Assets held for sale \n \n \n 20 \n \n \n 157 \n \n \n 153 \n \n \n \n \n TOTAL ASSETS \n \n \n \n \n \n 37,940 \n \n \n 35,686 \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n LIABILITIES \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Borrowings and lease liabilities \n \n \n 13 \n \n \n (2,071) \n \n \n (1,097) \n \n \n \n \n Other financial liabilities \n \n \n 15 \n \n \n (416) \n \n \n (642) \n \n \n \n \n Trade payables and other liabilities \n \n \n 14 \n \n \n (8,105) \n \n \n (8,009) \n \n \n \n \n Contract liabilities \n \n \n 12 \n \n \n (7,048) \n \n \n (6,309) \n \n \n \n \n Current tax liabilities \n \n \n \n \n \n (53) \n \n \n (117) \n \n \n \n \n Provisions for liabilities and charges \n \n \n 16 \n \n \n (525) \n \n \n (589) \n \n \n \n \n Current liabilities  \n \n \n \n \n \n (18,218) \n \n \n (16,763) \n \n \n \n \n Borrowings and lease liabilities \n \n \n 13 \n \n \n (2,838) \n \n \n (4,035) \n \n \n \n \n Other financial liabilities \n \n \n 15 \n \n \n (736) \n \n \n (1,640) \n \n \n \n \n Trade payables and other liabilities \n \n \n 14 \n \n \n (1,766) \n \n \n (1,965) \n \n \n \n \n Contract liabilities \n \n \n 12 \n \n \n (9,602) \n \n \n (9,447) \n \n \n \n \n Deferred tax liabilities \n \n \n \n \n \n (224) \n \n \n (231) \n \n \n \n \n Provisions for liabilities and charges \n \n \n 16 \n \n \n (1,092) \n \n \n (1,405) \n \n \n \n \n Post-retirement scheme deficits \n \n \n 17 \n \n \n (942) \n \n \n (981) \n \n \n \n \n Non - current liabilities  \n \n \n \n \n \n (17,200) \n \n \n (19,704) \n \n \n \n \n Liabilities associated with assets held for sale \n \n \n 20 \n \n \n (88) \n \n \n (100) \n \n \n \n \n TOTAL LIABILITIES \n \n \n \n \n \n (35,506) \n \n \n (36,567) \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n NET ASSETS / (LIABILITIES) \n \n \n   \n \n \n 2,434 \n \n \n (881) \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n EQUITY \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Called-up share capital 2 \n \n \n \n \n \n 1,691 \n \n \n 1,701 \n \n \n \n \n Share premium 2 \n \n \n \n \n \n - \n \n \n 1,012 \n \n \n \n \n Capital redemption reserve 2 \n \n \n \n \n \n 2 \n \n \n 168 \n \n \n \n \n Cash flow hedge reserve \n \n \n \n \n \n 13 \n \n \n 13 \n \n \n \n \n Translation reserve \n \n \n \n \n \n 307 \n \n \n 603 \n \n \n \n \n Retained earnings / (accumulated losses) 2 \n \n \n \n \n \n 395 \n \n \n (4,409) \n \n \n \n \n Equity attributable to ordinary shareholders \n \n \n \n \n \n 2,408 \n \n \n (912) \n \n \n \n \n Non-controlling interest (NCI) \n \n \n \n \n \n 26 \n \n \n 31 \n \n \n \n \n TOTAL EQUITY \n \n \n \n \n \n 2,434 \n \n \n (881) \n \n \n \n \n 1   An equity-accounted investment was recognised at fair value on the balance sheet as a result of the deconsolidation of Rolls-Royce SMR Limited during the period. Further details can be found in note 20 \n 2   On 1 May 2025 Rolls-Royce Holdings plc performed a bonus issue of one share from its merger reserve for £6,962m. This merger reserve was presented within retained earnings / (accumulated losses) within the consolidated statement of changes in equity. The company subsequently performed a capital reduction against share capital, share premium, and capital redemption reserve \n \n Condensed consolidated cash flow statement \n For the half-year ended 30 June 2025 \n \n \n \n \n \n \n \n Notes \n \n \n   \n Half-year to \n30 June 2025 \n £m \n \n \n   \n Half-year to \n 30 June 2024 \n £m \n \n \n \n \n Reconciliation of cash flows from operating activities \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Operating profit \n \n \n \n \n \n 2,074 \n \n \n 1,646 \n \n \n \n \n Loss on disposal of property, plant and equipment \n \n \n \n \n \n 4 \n \n \n 1 \n \n \n \n \n Share of results of joint ventures and associates \n \n \n \n \n \n (24) \n \n \n (78) \n \n \n \n \n Dividends received from joint ventures and associates \n \n \n \n \n \n 30 \n \n \n 15 \n \n \n \n \n Amortisation and impairment of intangible assets \n \n \n 8 \n \n \n 111 \n \n \n (287) \n \n \n \n \n Depreciation and impairment of property, plant and equipment \n \n \n 9 \n \n \n 132 \n \n \n 205 \n \n \n \n \n Depreciation and impairment of right-of-use assets \n \n \n 10 \n \n \n 13 \n \n \n 129 \n \n \n \n \n Impairment of and other movements on investments \n \n \n \n \n \n - \n \n \n 4 \n \n \n \n \n (Decrease)/Increase in provisions \n \n \n \n \n \n (395) \n \n \n 38 \n \n \n \n \n Increase in inventories \n \n \n \n \n \n (608) \n \n \n (641) \n \n \n \n \n Movement in trade receivables/payables and other assets/liabilities \n \n \n \n \n \n 300 \n \n \n 573 \n \n \n \n \n Movement in contract assets/liabilities \n \n \n \n \n \n 972 \n \n \n 497 \n \n \n \n \n Cash flows on other financial assets and liabilities held for operating purposes 1 \n \n \n \n \n \n (389) \n \n \n (410) \n \n \n \n \n Cash flows on settlement of excess derivative contracts 2 \n \n \n \n \n \n (116) \n \n \n (75) \n \n \n \n \n Interest received \n \n \n \n \n \n 150 \n \n \n 124 \n \n \n \n \n Net defined benefit post-retirement cost recognised in profit before financing \n \n \n 17 \n \n \n 33 \n \n \n 21 \n \n \n \n \n Cash funding of defined benefit post-retirement schemes \n \n \n 17 \n \n \n (39) \n \n \n (39) \n \n \n \n \n Share-based payments \n \n \n \n \n \n 60 \n \n \n 59 \n \n \n \n \n Net cash inflow from operating activities before taxation \n \n \n \n \n \n 2,308 \n \n \n 1,782 \n \n \n \n \n Taxation paid \n \n \n \n \n \n (290) \n \n \n (113) \n \n \n \n \n Net cash inflow from operating activities \n \n \n \n \n \n 2,018 \n \n \n 1,669 \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n Cash flows from investing activities \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Additions of intangible assets \n \n \n 8 \n \n \n (167) \n \n \n (165) \n \n \n \n \n Disposals of intangible assets \n \n \n \n \n \n 1 \n \n \n - \n \n \n \n \n Purchases of property, plant and equipment \n \n \n \n \n \n (202) \n \n \n (133) \n \n \n \n \n Disposals of property, plant and equipment \n \n \n \n \n \n 6 \n \n \n 7 \n \n \n \n \n Disposal of right-of-use assets \n \n \n \n \n \n 13 \n \n \n - \n \n \n \n \n Disposal of business \n \n \n 20 \n \n \n (85) \n \n \n - \n \n \n \n \n Movement in investments in joint ventures and associates \n \n \n \n \n \n (4) \n \n \n (16) \n \n \n \n \n Cash flows on other financial assets and liabilities held for non-operating purposes \n \n \n \n \n \n - \n \n \n (12) \n \n \n \n \n Net cash outflow from investing activities \n \n \n \n \n \n (438) \n \n \n (319) \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Cash flows from financing activities \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Repayment of loans \n \n \n \n \n \n (176) \n \n \n (475) \n \n \n \n \n Proceeds from increase in loans \n \n \n \n \n \n 176 \n \n \n 4 \n \n \n \n \n Settlement of swaps hedging fixed rate borrowings \n \n \n \n \n \n - \n \n \n (11) \n \n \n \n \n Capital element of lease payments \n \n \n \n \n \n (91) \n \n \n (122) \n \n \n \n \n Net cash flow from decrease in borrowings and lease liabilities \n \n \n \n \n \n (91) \n \n \n (604) \n \n \n \n \n Interest paid \n \n \n \n \n \n (96) \n \n \n (103) \n \n \n \n \n Interest element of lease payments \n \n \n \n \n \n (38) \n \n \n (42) \n \n \n \n \n Fees paid on undrawn facilities \n \n \n \n \n \n (2) \n \n \n (12) \n \n \n \n \n Cash received on maturity of share-based payment schemes \n \n \n \n \n \n 38 \n \n \n - \n \n \n \n \n Transactions with NCI 3 \n \n \n \n \n \n 35 \n \n \n 33 \n \n \n \n \n Redemption of C Shares \n \n \n \n \n \n (1) \n \n \n - \n \n \n \n \n Share buyback \n \n \n \n \n \n (380) \n \n \n - \n \n \n \n \n Dividend \n \n \n 7 \n \n \n (507) \n \n \n - \n \n \n \n \n Net cash outflow from financing activities \n \n \n \n \n \n (1,042) \n \n \n (728) \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Change in cash and cash equivalents \n \n \n \n \n \n  538 \n \n \n 622 \n \n \n \n \n Cash and cash equivalents at 1 January \n \n \n \n \n \n 5,573 \n \n \n 3,731 \n \n \n \n \n Exchange losses on cash and cash equivalents \n \n \n \n \n \n (69) \n \n \n (40) \n \n \n \n \n Cash and cash equivalents at 30 June 4 \n \n \n \n \n \n  6,042 \n \n \n 4,313 \n \n \n \n \n 1   Predominantly relates to cash settled on derivative contracts held for operating purposes \n 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 occurs over the period 2020-2026. During the period, the Group incurred a cash outflow of £116m (30 June 2024: £75m) and estimates that future cash outflows of £32m will be incurred during the remainder of 2025 and £27m during 2026 \n 3    Relates to NCI investment received in the period in respect of Rolls-Royce SMR Limited \n 4    The Group considers overdrafts (repayable on demand) and cash held for sale 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 \n \n \n Condensed consolidated cash flow statement continued \n For the half-year ended 30 June 2025 \n In deriving the condensed consolidated cash flow statement, movements in balance sheet line 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 19. \n   \n \n \n \n \n \n \n \n Half-year to 30 June 2025 \n \n \n Half-year to \n 30 June 2024 \n \n \n \n \n \n \n \n £m \n \n \n £m \n \n \n \n \n Reconciliation of movements in cash and cash equivalents to movements in net cash/(debt) \n \n \n   \n \n \n \n \n \n \n \n Change in cash and cash equivalents \n \n \n 538 \n \n \n 622 \n \n \n \n \n Cash flow from decrease in borrowings and lease liabilities \n \n \n 91 \n \n \n 604 \n \n \n \n \n Less: settlement of related derivatives included in fair value of swaps below \n \n \n - \n \n \n (11) \n \n \n \n \n Change in net debt resulting from cash flows \n \n \n 629 \n \n \n 1,215 \n \n \n \n \n Lease additions, modifications and other non-cash adjustments on borrowings and lease liabilities \n \n \n (63) \n \n \n (62) \n \n \n \n \n Exchange gains/(losses) on net debt \n \n \n 89 \n \n \n (26) \n \n \n \n \n Fair value adjustments \n \n \n 37 \n \n \n 17 \n \n \n \n \n Movement in net cash/(debt) \n \n \n 692 \n \n \n 1,144 \n \n \n \n \n Net cash/(debt) at 1 January excluding the fair value of swaps \n \n \n 442 \n \n \n (1,975) \n \n \n \n \n Net cash/(debt) at 30 June excluding the fair value of swaps \n \n \n 1,134 \n \n \n (831) \n \n \n \n \n Fair value of swaps hedging fixed rate borrowings \n \n \n (50) \n \n \n 9 \n \n \n \n \n Net cash/( debt) at 30 June \n \n \n 1,084 \n \n \n (822) \n \n \n \n \n The movement in net cash/(debt) (defined by the Group as including the items shown below) is as follows: \n \n \n \n \n \n \n \n At \n 1 January \n \n \n Funds flow \n \n \n Exchange differences \n \n \n Fair value adjustments \n \n \n Reclassifi-cations \n \n \n Other movements \n \n \n At \n30 June \n \n \n \n \n \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n \n \n 2025 \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n Cash at bank and in hand \n \n \n 714 \n \n \n 121 \n \n \n (20) \n \n \n - \n \n \n - \n \n \n - \n \n \n 815 \n \n \n \n \n Money market funds \n \n \n 1,900 \n \n \n 1,548 \n \n \n 6 \n \n \n - \n \n \n - \n \n \n - \n \n \n 3,454 \n \n \n \n \n Short-term deposits \n \n \n 2,961 \n \n \n (1,131) \n \n \n (55) \n \n \n - \n \n \n - \n \n \n - \n \n \n 1,775 \n \n \n \n \n Cash and cash equivalents (per balance sheet) \n \n \n 5,575 \n \n \n 538 \n \n \n (69) \n \n \n - \n \n \n - \n \n \n - \n \n \n 6,044 \n \n \n \n \n Overdrafts \n \n \n (2) \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (2) \n \n \n \n \n Cash and cash equivalents (per cash flow statement) \n \n \n 5,573 \n \n \n 538 \n \n \n (69) \n \n \n - \n \n \n - \n \n \n - \n \n \n 6,042 \n \n \n \n \n Other current borrowings \n \n \n (799) \n \n \n - \n \n \n (19) \n \n \n 61 \n \n \n (988) \n \n \n (1) \n \n \n (1,746) \n \n \n \n \n Non-current borrowings \n \n \n (2,776) \n \n \n - \n \n \n 68 \n \n \n (24) \n \n \n 988 \n \n \n (1) \n \n \n (1,745) \n \n \n \n \n Lease liabilities \n \n \n (1,555) \n \n \n 91 \n \n \n 109 \n \n \n - \n \n \n - \n \n \n (61) \n \n \n (1,416) \n \n \n \n \n Lease liabilities included within liabilities held for sale \n \n \n (1) \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (1) \n \n \n \n \n Financial liabilities \n \n \n (5,131) \n \n \n 91 \n \n \n 158 \n \n \n 37 \n \n \n - \n \n \n (63) \n \n \n (4,908) \n \n \n \n \n Net cash excluding the fair value of swaps \n \n \n 442 \n \n \n 629 \n \n \n 89 \n \n \n 37 \n \n \n - \n \n \n (63) \n \n \n 1,134 \n \n \n \n \n Fair value of swaps hedging fixed rate borrowings 1 \n \n \n 33 \n \n \n - \n \n \n (48) \n \n \n (35) \n \n \n - \n \n \n - \n \n \n (50) \n \n \n \n \n Net cash \n \n \n 475 \n \n \n 629 \n \n \n 41 \n \n \n 2 \n \n \n - \n \n \n (63) \n \n \n 1,084 \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n 2024 \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n Cash at bank and in hand \n \n \n 739 \n \n \n 9 \n \n \n (6) \n \n \n - \n \n \n - \n \n \n - \n \n \n 742 \n \n \n \n \n Money market funds \n \n \n 1,077 \n \n \n 437 \n \n \n (4) \n \n \n - \n \n \n - \n \n \n - \n \n \n 1,510 \n \n \n \n \n Short-term deposits \n \n \n 1,968 \n \n \n 129 \n \n \n (30) \n \n \n - \n \n \n - \n \n \n - \n \n \n 2,067 \n \n \n \n \n Cash and cash equivalents (per balance sheet) \n \n \n 3,784 \n \n \n 575 \n \n \n (40) \n \n \n - \n \n \n - \n \n \n - \n \n \n 4,319 \n \n \n \n \n Overdrafts \n \n \n (53) \n \n \n 47 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (6) \n \n \n \n \n Cash and cash equivalents (per cash flow statement) \n \n \n 3,731 \n \n \n 622 \n \n \n (40) \n \n \n - \n \n \n - \n \n \n - \n \n \n 4,313 \n \n \n \n \n Other current borrowings \n \n \n (478) \n \n \n 471 \n \n \n - \n \n \n 2 \n \n \n - \n \n \n 1 \n \n \n (4) \n \n \n \n \n Non-current borrowings \n \n \n (3,568) \n \n \n - \n \n \n 13 \n \n \n 15 \n \n \n - \n \n \n (2) \n \n \n (3,542) \n \n \n \n \n Lease liabilities \n \n \n (1,660) \n \n \n 122 \n \n \n 1 \n \n \n - \n \n \n - \n \n \n (61) \n \n \n (1,598) \n \n \n \n \n Financial liabilities \n \n \n (5,706) \n \n \n 593 \n \n \n 14 \n \n \n 17 \n \n \n - \n \n \n (62) \n \n \n (5,144) \n \n \n \n \n Net (debt) excluding fair value of swaps \n \n \n (1,975) \n \n \n 1,215 \n \n \n (26) \n \n \n 17 \n \n \n - \n \n \n (62) \n \n \n (831) \n \n \n \n \n Fair value of swaps hedging fixed rate borrowings 1 \n \n \n 23 \n \n \n 11 \n \n \n (13) \n \n \n (12) \n \n \n - \n \n \n - \n \n \n 9 \n \n \n \n \n Net (debt) \n \n \n (1,952) \n \n \n 1,226 \n \n \n (39) \n \n \n 5 \n \n \n - \n \n \n (62) \n \n \n (822) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 1   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 included in fair value hedges (30 June 2025: £28m, 31 December 2024: £62m) and the element of fair value relating to exchange differences on the underlying principal of derivatives in cash flow hedges (30 June 2025: £(78)m, 31 December 2024: £(29)m) \n     \n Condensed consolidated statement of changes in equity \n For the half-year ended 30 June 2025 \n \n \n \n \n   \n \n \n   \n \n \n Attributable to ordinary shareholders \n \n \n   \n \n \n \n \n \n \n \n Notes \n \n \n Share capital \n \n \n Share premium \n \n \n Capital redemption reserve \n \n \n Cash flow hedging reserve \n \n \n Translation reserve \n \n \n Retained earnings/ (accumulated losses) 1 \n \n \n Total \n \n \n NCI \n \n \n Total equity \n \n \n \n \n \n \n \n   \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n \n \n At 1 January 2025 \n \n \n   \n \n \n 1,701 \n \n \n 1,012 \n \n \n 168 \n \n \n 13 \n \n \n 603 \n \n \n (4,409) \n \n \n (912) \n \n \n 31 \n \n \n (881) \n \n \n \n \n Profit for the period \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 4,416 \n \n \n 4,416 \n \n \n (8) \n \n \n 4,408 \n \n \n \n \n Foreign exchange translation differences on foreign operations \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (296) \n \n \n - \n \n \n (296) \n \n \n - \n \n \n (296) \n \n \n \n \n NCI disposed of on disposal of business \n \n \n 20 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (23) \n \n \n (23) \n \n \n \n \n Actuarial movements on post-retirement schemes \n \n \n 17 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (20) \n \n \n (20) \n \n \n - \n \n \n (20) \n \n \n \n \n Fair value movement on cash flow hedging reserve \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n (58) \n \n \n - \n \n \n - \n \n \n (58) \n \n \n - \n \n \n (58) \n \n \n \n \n Reclassified to income statement from cash flow hedging reserve \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n 51 \n \n \n - \n \n \n - \n \n \n 51 \n \n \n - \n \n \n 51 \n \n \n \n \n Revaluation to fair value of other investments \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 1 \n \n \n 1 \n \n \n - \n \n \n 1 \n \n \n \n \n OCI of joint ventures and associates \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n 5 \n \n \n - \n \n \n (1) \n \n \n 4 \n \n \n - \n \n \n 4 \n \n \n \n \n Related tax movements \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n 2 \n \n \n - \n \n \n 9 \n \n \n 11 \n \n \n - \n \n \n 11 \n \n \n \n \n Total comprehensive (expense)/income for the period \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (296) \n \n \n 4,405 \n \n \n 4,109 \n \n \n (31) \n \n \n 4,078 \n \n \n \n \n Bonus issue 2 \n \n \n \n \n \n 6,962 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (6,962) \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Capital reduction 2 \n \n \n   \n \n \n (6,962) \n \n \n (1,012) \n \n \n (177) \n \n \n - \n \n \n - \n \n \n 8,151 \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Share buyback programme 3 \n \n \n   \n \n \n (10) \n \n \n - \n \n \n 10 \n \n \n - \n \n \n - \n \n \n (397) \n \n \n (397) \n \n \n - \n \n \n (397) \n \n \n \n \n Redemption of C shares \n \n \n 15 \n \n \n - \n \n \n - \n \n \n 1 \n \n \n - \n \n \n - \n \n \n (1) \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Share-based payments - direct to equity 4 \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 96 \n \n \n 96 \n \n \n - \n \n \n 96 \n \n \n \n \n Dividends paid \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (507) \n \n \n (507) \n \n \n - \n \n \n (507) \n \n \n \n \n Transactions with NCI 5 \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 9 \n \n \n 9 \n \n \n 26 \n \n \n 35 \n \n \n \n \n Related tax movements \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 10 \n \n \n 10 \n \n \n - \n \n \n 10 \n \n \n \n \n Other changes in equity in the period \n \n \n \n \n \n (10) \n \n \n (1,012) \n \n \n (166) \n \n \n - \n \n \n - \n \n \n 399 \n \n \n (789) \n \n \n 26 \n \n \n (763) \n \n \n \n \n At 30 June 2025 \n \n \n \n \n \n 1,691 \n \n \n - \n \n \n 2 \n \n \n 13 \n \n \n 307 \n \n \n 395 \n \n \n 2,408 \n \n \n 26 \n \n \n 2,434 \n \n \n \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n At 1 January 2024 \n \n \n \n \n \n 1,684 \n \n \n 1,012 \n \n \n 167 \n \n \n 12 \n \n \n 634 \n \n \n (7,190) \n \n \n (3,681) \n \n \n 52 \n \n \n (3,629) \n \n \n \n \n Profit for the period \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 1,149 \n \n \n 1,149 \n \n \n (13) \n \n \n 1,136 \n \n \n \n \n Foreign exchange translation differences on foreign operations \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (24) \n \n \n - \n \n \n (24) \n \n \n - \n \n \n (24) \n \n \n \n \n Actuarial movements on post-retirement schemes \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 124 \n \n \n 124 \n \n \n - \n \n \n 124 \n \n \n \n \n Fair value movement on cash flow hedging reserve \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n (16) \n \n \n - \n \n \n - \n \n \n (16) \n \n \n - \n \n \n (16) \n \n \n \n \n Reclassified to income statement from cash flow hedging reserve \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n 15 \n \n \n - \n \n \n - \n \n \n 15 \n \n \n - \n \n \n 15 \n \n \n \n \n Revaluation to fair value of other investments \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (3) \n \n \n (3) \n \n \n - \n \n \n (3) \n \n \n \n \n OCI of joint ventures and associates \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n (2) \n \n \n - \n \n \n (6) \n \n \n (8) \n \n \n - \n \n \n (8) \n \n \n \n \n Related tax movements \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 35 \n \n \n 35 \n \n \n - \n \n \n 35 \n \n \n \n \n Total comprehensive (expense)/income for the period \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n (3) \n \n \n (24) \n \n \n 1,299 \n \n \n 1,272 \n \n \n (13) \n \n \n 1,259 \n \n \n \n \n Issue of ordinary shares \n \n \n \n \n \n 17 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 17 \n \n \n - \n \n \n 17 \n \n \n \n \n Shares issued to employee share trust \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (17) \n \n \n (17) \n \n \n - \n \n \n (17) \n \n \n \n \n Share-based payments - direct to equity 4 \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 39 \n \n \n 39 \n \n \n - \n \n \n 39 \n \n \n \n \n Transactions with NCI 5 \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 26 \n \n \n 26 \n \n \n 16 \n \n \n 42 \n \n \n \n \n Related tax movements \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 52 \n \n \n 52 \n \n \n - \n \n \n 52 \n \n \n \n \n Other changes in equity in the period \n \n \n \n \n \n 17 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 100 \n \n \n 117 \n \n \n 16 \n \n \n 133 \n \n \n \n \n At 30 June 2024 \n \n \n \n \n \n 1,701 \n \n \n 1,012 \n \n \n 167 \n \n \n 9 \n \n \n 610 \n \n \n (5,791) \n \n \n (2,292) \n \n \n 55 \n \n \n (2,237) \n \n \n \n \n 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 retained earnings/(accumulated losses) (30 June 2024: 110,852,000 ordinary shares with an aggregate value of £27m). During the period: \n - 74,400,310 ordinary shares with an aggregate value of £18m vested in share-based payment plans (30 June 2024: 30,331,000 ordinary shares with an aggregate value of £13m); \n - the Company issued nil new ordinary shares to the Group's share trust for its employee share-based payment plans with an aggregate value of £nil (30 June 2024: 88,200,000 ordinary shares with an aggregate value of £17m); and \n - the Company, through the Employee Benefit Trust, acquired none (30 June 2024: none) of its ordinary shares via reinvestment of dividends received on its own shares and purchased none (30 June 2024: 71,490) of its ordinary shares through purchases on the London Stock Exchange \n 2   On 1 May 2025 Rolls-Royce Holdings plc performed a bonus issue of one share from its merger reserve for £6,962m. This merger reserve was presented within retained earnings / (accumulated losses) within the consolidated statement of changes in equity. The company subsequently performed a capital reduction against share capital, share premium, and capital redemption reserve \n 3   Following the announcement of the £1bn share buyback on 27 February 2025, during the period the Company purchased with cash 48,623,940 (30 June 2024: none) of its ordinary shares at a cost of £378m. The Company also separately paid costs of £2m in relation to the programme. \n The Company recognised a creditor of £5m, relating to a further 513,407 shares that had been purchased at 30th June 2025 but not yet paid. \n Of these ordinary shares purchased by the Company 48,623,940 shares at a cost of £378m were cancelled during the period. As at 30 June 2025 the Company held 513,407 ordinary shares with a net book value of £5m within Treasury shares. The Company intends to cancel these shares during 2025. The Company has also accrued for a further liability of £14m, representing an estimate of the amount it was committed to purchase under the terms of its Share Purchase Agreement but as yet unpurchased at 30 June 2025 \n 4   Share-based payments - direct to equity is the share-based payment charge for the period less the actual cost of vesting excluding those vesting from own shares and cash received on share-based schemes \n 5   Relates to NCI investment received in the period in respect of Rolls-Royce SMR Limited \n \n \n Notes to the Condensed Consolidated Interim Financial Statements \n \n 1     Basis of preparation and accounting policies \n \n Reporting entity \n 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 2025 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. \n The Consolidated Financial Statements of the Group as at and for the year ended 31 December 2024 (2024 Annual Report) are available upon request from the Company Secretary, Rolls-Royce Holdings plc, Kings Place, 90 York Way, London, N1 9FX. \n The Board of Directors approved the condensed consolidated interim financial statements on 31 July 2025. \n Statement of compliance \n These condensed consolidated interim financial statements have been prepared on the basis of the policies set out in the 2024 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 2024 Annual Report. \n The interim figures up to 30 June 2025 and 2024 are unaudited. The 2024 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. \n Revisions to IFRS applicable in 2025 \n There are no new standards or interpretations issued by the IASB that had a significant impact on these condensed consolidated interim financial statements. \n Revisions to IFRS not applicable to 2025 \n 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 \n IFRS 18 Presentation and Disclosure in Financial Statements \n 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 lead the Group to make some changes in its future Annual Report and Interim Financial Statements. \n The new Standard is not yet endorsed by the UK Endorsement Board (UKEB) but is expected to be applicable for reporting periods beginning on or after 1 January 2027. Comparative information for 2026 will need to be restated when the 2027 Interim Financial Statements and Annual Report and Accounts are published. The Group has started an initial review of the Standard and expects changes to the presentation of the income statement and the Group's reported operating profit (driven by required changes such as moving 'Share of results of joint ventures and associates' into a new investing category which will no longer form part of operating profit in the Statutory Consolidated Income Statement). The process of assessing the financial impact on the Consolidated Financial Statements will continue during the remainder of 2025. The Group does not anticipate its early adoption of the new Standard. \n Post balance sheet events \n The Group has taken the latest legal position in relation to any ongoing legal proceedings and reflected these in the 30 June 2025 results as appropriate. \n On 1 July 2025 the Group completed the disposal of its naval propulsors business to Fairbanks Morse Defense as set out in note 20. Disposal proceeds were in excess of the carrying value of the assets and liabilities. The sale of the naval handling business also to Fairbanks Morse Defense is expected to complete at a later date. \n Climate change \n 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 2024 Annual Report that set out climate-related commitments, targets and the four pillars of the Rolls-Royce energy strategy that are: \n -     decarbonising operations, facilities, product testing and business activities. This will be met through a combination of procuring clean energy, reducing overall energy demand, and clean power generation. An estimate of the investment required to meet scope 1 + 2 emission improvements is included in the forecasts that support these condensed consolidated interim financial statements; \n -     enabling customers to operate their products in a way that is compatible with low or net zero carbon emissions. The Group has demonstrated that all the commercial aero engines it produces, and 80% of the Power Systems portfolio, is compatible with alternative and sustainable fuels; \n -     delivering new products and solutions that can accelerate the global energy transition. This includes the development and deployment of small modular reactors (SMRs) and, in Power Systems, battery energy storage solutions is a growth area; and \n -     supporting the necessary enabling environment, with public and policy support, to achieve collective climate goals. \n   \n \n 1     Basis of preparation and accounting policies continued \n \n In this context 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: \n -     Civil Aerospace LTSA revenues; \n -     estimates of future cash flows considered for trigger assessments and used in impairment assessments for non-financial asset impairments; and \n -     estimates of suitable taxable profits that will arise in the UK to utilise the deferred tax assets recognised. \n 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 has been used to quantify the potential impact of future policy changes on the Group. The approach is consistent with that disclosed in note 1 in the 2024 Annual Report. \n There have been no significant changes to assumptions, including the potential impact of carbon prices on the Group's cost base, since the year ended 31 December 2024. Hence, these considerations did not have a material impact on financial reporting key judgements and estimates in the period and 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. \n Going concern \n Overview \n In adopting the going concern basis for preparing these condensed consolidated interim 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 2026 (the 'going concern period'). The processes for identifying and managing risk are described in the Group's 2024 Annual Report on pages 52 to 60. As described on those pages, the risk management process and the going concern statement are designed to provide reasonable but not absolute assurance. \n Forecasts \n Recognising the challenges of reliably estimating and forecasting the impact of external factors on the Group, the Directors have reviewed the Group's 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 over the going concern period. A downside forecast has also been modelled which envisages severe but plausible downside risks. \n The Group's base case forecast reflects the Directors best estimation of how the business plans to perform over the going concern period. 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%. \n The downside forecast assumes Civil Aerospace large engine flying hours remain at average second quarter 2025 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, potential output risks associated with increasing volumes and possible ongoing supply chain challenges. \n In reviewing the Group's cash flow forecasts and available liquidity, the Directors have considered the current volatility in macroeconomic variables, including recently announced global tariff increases which have created a degree of uncertainty for the industry. The Directors expect to fully offset the impact of announced tariffs on the Group through the mitigating actions that are being taken. The Directors continue to closely monitor the potential indirect impact on economic growth, foreign exchange and inflation and will continue to take necessary actions. \n In modelling both the base case and downside forecast, the repayment of a $1bn bond that is due to mature in October 2025 has been assumed to be repaid from cash as stated externally. The subsequent 2026 maturities, being a €750m bond in February 2026 and a £375m bond in June 2026 have also been assumed to be repaid from cash in both the base case and downside forecast. \n 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 2024 Annual Report. Consistent with our assessment in the 2024 Annual Report, climate change in not expected to have a significant impact on the Group over the going concern period. More detail can be found on page 38 of the 2024 Annual Report. \n Liquidity and borrowings \n At 30 June 2025, the Group had liquidity of £8.5bn including cash and cash equivalents of £6.0bn and undrawn facilities of £2.5bn. \n The Group's committed borrowing facilities at 30 June 2025 and 31 December 2026 are set out below. None of the facilities are subject to any financial covenants or rating triggers which could accelerate repayment. \n \n \n \n \n £m \n \n \n 30 June 2025 \n \n \n 31 December 2026 \n \n \n \n \n \n \n Issued Bond Notes 1 \n \n \n 3,511 \n \n \n 1,801 \n \n \n \n \n Revolving Credit Facility (undrawn) 2 \n \n \n 2,500 \n \n \n 2,500 \n \n \n \n \n Total committed borrowing facilities \n \n \n 6,011 \n \n \n 4,301 \n \n \n \n \n 1 The value of Issued Bond Notes reflects the impact of derivatives on repayments of the principal amount of debt. The bonds mature by May 2028 \n 2 The £2.5bn Revolving Credit Facility matures in November 2027 (currently undrawn) with one subsequent one year extension option \n Taking into account the maturity of these borrowing facilities, the Group has committed facilities of at least £4.3bn available throughout the going concern period. \n Conclusion \n After reviewing the current liquidity position and the cash flow forecasts modelled under both the base case and downside forecast, the Directors consider that the Group has sufficient liquidity to continue in operational existence over the going concern period to 31 December 2026 and are therefore satisfied that it is appropriate to adopt the going concern basis of accounting in preparing the interim financial statements. \n \n \n 1     Basis of preparation and accounting policies continued \n \n Key areas of judgement and sources of estimation uncertainty \n 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 2024, that were assessed as having a significant risk of causing material adjustments to the carrying amount of assets and liabilities, are set out in \nnote 1 to the Consolidated Financial Statements in the 2024 Annual Report and are summarised below. During the period, the Group has \nre-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. \n \n \n \n \n Area \n \n \n Key judgements \n \n \n Key sources of estimation uncertainty \n \n \n Sensitivities performed \n \n \n \n \n Revenue recognition and contract assets and liabilities \n \n \n Whether Civil Aerospace OE and aftermarket contracts should be combined. \n How performance on long-term aftermarket contracts should be measured. \n Whether long-term aftermarket contracts contain a significant financing component. \n Whether any costs should be treated as wastage. \n 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 . \n Whether sales of spare engines to joint ventures are at fair value. \n When revenue should be recognised in relation to spare engine sales. \n   \n \n \n Estimates of future revenue, including customer pricing, and costs of long-term contractual arrangements, including the impact of climate change. \n \n \n Based upon the stage of completion of all large engine LTSA contracts within Civil Aerospace as at 30 June 2025, 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): \n 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 £20m. 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. \n 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 £360m. \n 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 \n£90m. \n   \n \n \n \n \n Risk and revenue sharing arrangements (RRSAs) \n   \n \n \n Determination of the nature of entry fees received. \n \n \n \n \n \n \n \n \n \n \n Taxation \n \n \n \n \n \n Estimates necessary to assess whether it is probable that sufficient suitable taxable profits will arise in the UK to utilise the deferred tax assets recognised. \n \n \n The following sensitivities have been modelled using 100% probability of a base case forecast (31 December 2024: 75% base case / 25% downside forecast) to reflect the possibility of plausible downside risks: \n A 5% reduction in margin or a 5% reduction in the number of shop visits (which could be driven by fewer EFH, the impact of climate change, and/or macro-economic factors) would result in a decrease in the deferred tax asset in respect of UK losses of around £165m and £135m respectively. \n If only 90% of assumed future cost increases from climate change are passed on to customers, this would result in a decrease in the deferred tax asset of around £20m, and if carbon prices were to double, this would be £90m . \n   \n \n \n \n \n Research and development \n \n \n Determination of the point in time where costs incurred on an internal programme development meet the criteria for capitalisation. \n Determination of the basis for amortising capitalised development costs. \n   \n \n \n \n \n \n \n \n \n \n \n Leases \n \n \n Determination of the lease term. \n \n \n \n \n \n \n \n \n \n \n \n 1     Basis of preparation and accounting policies continued \n \n Key areas of judgement and sources of estimation uncertainty continued \n \n \n \n \n Area \n \n \n Key judgements \n \n \n Key sources of estimation uncertainty \n \n \n Sensitivities performed \n \n \n \n \n \n \n Impairment of non-current assets \n \n \n Determination of cash-generating units for assessin...

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