Aero engine and defence group Rolls-Royce (RR.) issued a positive AGM statement confirming its FY26 financial targets. The firm assured investors it would ‘fully mitigate’ the current financial impact of the Middle East disruption on its business.
Strong start to FY26
Rolls-Royce said it had a ‘strong start to the year across all three divisions’. In Civil Aerospace, widebody demand remains strong and it has a young fleet which is growing faster than the market.
Large EFH (engine flying hours) grew 5% to 115% of 2019 levels in Q1, and for FY26 should remain at 115%-120% of 2019 levels. The firm said there had already been a ‘significant’ recovery in EFH of Middle Eastern airlines using Trent XWB engines.
At the same time, large engine deliveries rose 18% in Q1, showing good operational momentum. Large engine shop visits increased by 12%, and the firm sees no change in its 2026/27 schedules due to geopolitics.
Meanwhile, Defence and Power Systems are ‘highly resilient businesses with growth outlooks remaining highly attractive’, the firm said. In Defence, demand remains strong for traditional products like jet fighter engines and for new technologies like unmanned aircraft.
Power Systems also had a strong start to FY26 driven by power generation, data centres and infrastructure projects. Order intake across gas and diesel engines was up 50% in Q1 and March was a record month for bookings.
CEO Tufan Erginbilgic had no hesitation in reaffirming the group’s operating profit and free cash flow targets for the full year. ‘We remain strongly positioned to deliver our mid-term targets, with substantial growth beyond the mid-term’, he added.
Having been the stars of the show through 2024 and 2025, Rolls-Royce shares had lost some of their shine recently. Given the firm’s reliance on civil aviation and large engine servicing, disruption to flights and redeuced EFH was obviously unhelpful.
However, today’s statement should help calm any investor nerves over the resilience of the firm’s separate businesses. Demand for new widebody aircraft hasn’t gone away, and Rolls is the preferred supplier on a number of programmes.
Moreover, since its transformation the group has best-in-class cash costs to gross margins and a net cash position. It has also repaid debt and is pushing on with its substantial £7 billion to £9 billion share buyback, adding to the appeal.
Read the press release here:
https://www.rolls-royce.com/investors.aspx
