Rolls-Royce Holdings plc (LON:RR) has announced its full year results – 2025
Strong 2025 results; Upgraded mid-term guidance; Multi-year share buyback announced
| – | Significant progress in 2025 driven by our transformation programme, which has also allowed us to capture profitable end market growth | |
| – | Underlying operating profit of £3.5bn with a margin of 17.3%, reflecting the impact of our strategic initiatives and commercial optimisation | |
| – | Free cash flow of £3.3bn driven by strong operating profit and continued LTSA balance growth, supporting a net cash balance of £1.9bn at 31 December 2025 | |
| – | 2026 guidance of £4.0bn-£4.2bn underlying operating profit and £3.6bn-£3.8bn free cash flow | |
| – | Upgraded mid-term targets of £4.9bn-£5.2bn underlying operating profit, 18%-20% operating margin, £5.0bn-£5.3bn free cash flow, and 23%-26% return on capital based on a 2028 timeframe | |
| – | Final dividend of 5.0p per share, taking the total dividend for 2025 to 9.5p; a 32% payout ratio of underlying profit after tax | |
| – | £7bn – £9bn multi-year share buyback across 2026-2028 following completion of the £1bn share buyback in 2025 |
Tufan Erginbilgic, Rolls-Royce CEO said: “Our transformation continues with pace and intensity. We are consistently achieving outcomes that were not possible before our transformation. With our new capabilities and mindset, we have navigated challenges from supply chain to tariffs, and delivered a strong performance in 2025, all while we built the foundations for significant growth for years to come.
Based on our 2026 guidance, we expect to deliver underlying operating profit within the prior mid-term guidance range two years earlier than planned. Our upgraded mid-term targets include underlying operating profit of £4.9bn-£5.2bn and free cash flow of £5.0bn-£5.3bn. Beyond the mid-term we continue to see significant growth from existing businesses as well as from new business opportunities.
With a strong balance sheet, significant investment to support our long-term growth, and confidence in the future, we are announcing a £7bn-£9bn share buyback for 2026-2028 with £2.5bn to be completed this year.”
Full Year 2025 Group Results
| Underlying2025 1 | Underlying2024 1 | Statutory 2025 | Statutory 2024 | |||
| £ million | ||||||
| Revenue | 20,059 | 17,848 | 21,207 | 18,909 | ||
| Operating profit | 3,462 | 2,464 | 4,468 | 2,906 | ||
| Operating margin % | 17.3% | 13.8% | 21.1% | 15.4% | ||
| Profit before taxation | 3,352 | 2,293 | 6,935 | 2,234 | ||
| Basic earnings per share (pence) 2 | 29.55 | 20.29 | 69.41 | 30.05 | ||
| Free cash flow | 3,270 | 2,425 | ||||
| Return on capital (%) 2, 3 | 18.9% | 13.8% | ||||
| Net cash flow from operating activities | 4,565 | 3,782 | ||||
| Net cash | 1,895 | 475 | ||||
| 1 | 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 52 to 55 | |||||
| 2 | In 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 earnings per share, the proposed dividend payout ratio, and return on capital. For further details, see note 5, page 33 | |||||
| 3 | Adjusted return on capital is defined on page 55 and is abbreviated to return on capital | |||||
Full Year 2025 performance summary
| – | Strategic delivery: 2025 has been another year of strong strategic and financial delivery with a significant improvement across all financial metrics. Over the past three years, our transformation programme has delivered a step‑change in performance, with higher operating profit and free cash flow delivered alongside a doubling of capital expenditure, as we continue to transform Rolls-Royce into a high-performing, competitive, resilient, and growing business. Our actions have driven stronger financial performance despite an external environment that remains challenging, including supply chain constraints which we are actively managing. |
| – | Significant operating profit and margin growth: Underlying operating profit increased to £3.5bn in 2025 compared with £2.5bn in 2024, with an operating margin of 17.3% (2024: 13.8%). Civil Aerospace delivered an underlying operating margin of 20.5% (2024: 16.6%), driven by stronger large engine aftermarket performance, contractual margin improvements and higher spare engine profitability. Defence reported an underlying operating margin of 14.4% (2024: 14.2%), which reflects stronger performance across transport and combat, and the absence of a one-off benefit in submarines in the prior year. Power Systems delivered an operating margin of 17.4% (2024: 13.1%), driven by power generation, where we continue to capture profitable growth in data centres, and governmental. Across the Group, improved profitability was supported by our ongoing efficiency and simplification programme. |
| – | Sustainable free cash flow growth: Free cash flow of £3.3bn (2024: £2.4bn) was driven by strong operating profit, continued long-term service agreement (LTSA) balance growth, and a strong working capital performance offset by net investments. Civil Aerospace LTSA balance growth net of risk and revenue sharing arrangements (RRSAs) was £0.6bn (2024: £0.7bn), this was supported by 8% growth in large engine flying hours (EFH) and an improved EFH rate, partly offset by a higher number of shop visits and supply chain costs. Working capital was an inflow of £421m (2024: £280m), reflecting the continued benefits of our working capital initiatives. Net investments of £257m (2024: £282m) supported maintenance repair and overhaul (MRO) capacity growth in Civil Aerospace and additional capacity in Power Systems. |
| – | Building resilience: Net cash stood at £1.9bn at 31 December 2025 compared with £475m at the end of 2024, supported by continued strong cash flow delivery. Gross debt reduced to £2.8bn (2024: £3.6bn), as we repaid a $1bn bond in October from available cash, and lease liabilities stood at £1.5bn (2024: £1.6bn). Liquidity remained robust at £8.7bn (2024: £8.1bn), which included cash and cash equivalents of £6.2bn (2024: £5.6bn). Total underlying cash costs as a proportion of underlying gross margin (TCC/GM) further improved to 0.36x (2024: 0.47x), reflecting further cost discipline and operational efficiency. We are building a more resilient company with a less volatile free cash flow. |
| – | Growing shareholder returns: Reflecting strong strategic and financial progress and in line with our capital framework, we reinstated regular shareholder dividends in 2025 and completed a £1.0bn share buyback programme. This represented the first time that Rolls-Royce has paid a dividend in more than five years and the first buyback for 10 years. The final dividend for 2025 is 5.0p per share, taking the total dividend for 2025 to 9.5p, which represents a 32% payout ratio of underlying profit after tax. The final dividend will be paid subject to shareholder approval at our Annual General Meeting on 30 April 20261. Our strong balance sheet position, alongside our upgraded mid-term targets for operating profit and free cash flow, gives us confidence to announce our first multi-year buyback programme, totalling £7bn-£9bn across 2026 to 2028, of which £2.5bn will be completed in 2026, which includes the £200m that was completed between 2 January and 20 February 2026. |
| 1 | The dividend will be paid on 3 June 2026 to ordinary shareholders on the register on 24 April 2026. In addition to the cash dividend, shareholders will be offered a dividend reinvestment plan. For further details, see note 7, page 34 |
Transformation programme and strategic initiatives
Our strategic framework is founded on four strategic pillars. We have made significant progress against each of these pillars over the past three years, including in 2025.
| – | Portfolio choices & partnerships: | |
| • | ČEZ Group completed strategic investments in Rolls-Royce SMR, alongside a commitment for up to six units in the Czech Republic. | |
| • | We are continuing to expand our MRO capacity, which has supported a more than 50% increase in large engine shop visits over the past three years. In 2025, we added capacity in Derby, Dahlewitz, and Singapore. By the mid-term, we will increase our capacity by an additional 20% across the network to support long-term fleet growth. The Beijing Aero Engine Services Limited (BAESL) joint venture with Air China opened in December and will support up to 250 Trent XWB-84, Trent 1000, and Trent 700 overhauls per annum by the mid‑2030s. In partnership with Turkish Technic, we announced the establishment of a state-of-the-art independent maintenance centre in Istanbul, targeted to be operational by the end of 2027, supporting up to 200 shop visits annually for Trent XWB-84, Trent XWB-97, and Trent 7000 engines. | |
| • | The Pearl 700-powered Gulfstream G800 entered service in August. Certification for the Pearl 10X engine, which powers the Dassault Falcon 10X, is underway, with all engine certification tests successfully completed in 2025 and the on-going finalisation of the certification reports for the European Union Aviation Safety Agency (EASA) is progressing to plan. | |
| • | In Power Systems, testing of our next-generation engines for power generation and governmental applications is progressing to plan. This includes our next generation Series 4000 engine, to be released in 2028, which targets the data centre market with a significantly improved power density, alongside the development of an upgraded military engine. | |
| • | We continue to invest in power generation, significantly increasing capacity in Germany and at our US sites in Aiken and Mankato to support growing demand, driven by data centres. | |
| • | In Defence, testing of the AE 1107 and F130 engines, which will power the MV-75 (Future Long-Range Assault Aircraft) and B-52 aircraft, is progressing to plan. We are supporting the ramp-up of these programmes with significant investments in the US, which totalled around $1bn in Indianapolis alone over the past decade. | |
| • | Rolls-Royce submarines, alongside Assystem, AtkinsRéalis, and Frazer-Nash, formed the Capability Assured Strategic Partnership, which brings together nuclear capability in the UK to support the Royal Navy’s submarines programme and the wider Defence Nuclear Enterprise. | |
| • | In July, we completed the sale of our naval propulsors business to Fairbanks Morse Defense. | |
| – | Advantaged businesses & strategic initiatives: | |
| • | In Civil Aerospace, we continued to increase the LTSA margins across our in-production widebody engines through improved commercial terms alongside operational improvements. As a result of our actions, the value of our LTSA contracts has increased significantly since 2022. | |
| • | Our time on wing programme now targets more than a 100% increase in durability across our in-production Trent engines by the end of 2027, with more than half of this improvement now delivered. The increase compared to our previous target of more than 80% is primarily driven by further life extensions for the Trent XWB-84, where we have refined and accelerated our programme to extend critical part lives. The life extension programme for the Trent XWB-84 will be completed in 2026. Building on this, the recently introduced Trent XWB-84EP improves fuel efficiency by over 1% and improves time on wing for new engines. In June, the Trent 1000 XE phase one HPT blade improvement was certified and is being fitted to new and in-service engines. In December, the phase two HPT blade was certified for the Trent 1000 XE and Trent 7000 engines and will begin to be incorporated into new and in-service engines in 2026. Durability upgrades for the Trent XWB-97 made significant progress through material, component, and cyclic engine testing in 2025, with time on wing improvements remaining on track for completion by the end of 2027. We are continually seeking to improve the time on wing of all our engines. For example, we also delivered durability enhancements for the Trent 900 engine which will yield up to a 30% time on wing improvement. | |
| • | In Power Systems, we are capturing profitable growth opportunities in power generation and governmental. In power generation, we announced a new fast-start gas generator product in October that will offer prime power for data centre customers who are awaiting grid connection, and which can later be switched to backup power generation once the data centre is connected to the grid. In governmental, we received a major order in December to supply more than 300 Leopard 2 engines. | |
| • | In Defence, demand for our products remains robust and we secured major orders in 2025. In the first half of the year, we secured key aftermarket contracts worth more than £1.5bn with the UK MoD and US DoW covering EJ200 and AE 2100 engines. In the second half of the year, the Republic of Türkiye and the UK signed an agreement to export 20 British-built Eurofighter Typhoon aircraft, with an option for more in the future. In September, on the Global Combat Air Programme (GCAP), the international consortium announced a major expansion of their partnership to accelerate development of the power and propulsion system for the next-generation fighter aircraft. | |
| – | Efficiency & simplification: | |
| • | Our efficiency and simplification programme has delivered £0.6bn of savings since the start of 2022, above our target of £0.5bn by the end of 2025. | |
| • | We delivered £1.2bn of gross third-party procurement savings since the start of 2022, also above our target of £1.0bn by the end of 2025. | |
| • | We are driving further efficiencies to support disciplined growth across the Group, including scaling up our Group Business Services (GBS) capabilities in India and Poland, alongside growing our digital capabilities and the continued implementation of zero-based budgeting. | |
| • | We further improved our best-in-class TCC/GM ratio to 0.36x (2024: 0.47x), evidence of the continued strengthening of our competitive advantage and resilience. | |
| – | Lower carbon & digitally enabled businesses: | |
| • | In June, Rolls-Royce SMR was chosen as the sole provider in the Great British Energy – Nuclear (GBE-N) small modular reactors (SMR) competition to build three SMR units in the UK. In November, it was confirmed that the Wylfa site on the coast of Ynys Môn (Anglesey) will host three Rolls-Royce SMRs, with this site capable of taking eight units. In the Czech Republic, work began at the Temelin site. In August, Rolls-Royce SMR advanced to the final stage of the Swedish competition to select a nuclear technology partner, with Vattenfall moving ahead with small nuclear options only. | |
| • | We reached a key milestone with the launch of our AI platform, AiRR, with capabilities in generative and agentic AI. This sits at the core of our efforts to develop and deploy high-value AI capabilities across engineering, MRO, and the supply chain which are expected to reduce turnaround times and product and shop visit costs. | |
| • | In Power Systems, demand for battery energy storage systems (BESS) remains high, with major orders across Europe, including a large order in Lithuania that will provide approximately 600MWh of capacity to the grid. We continue to advance lower carbon propulsion. In October, we conducted the world’s first successful test of a highspeed marine engine running on pure methanol, futureproofing our solutions for the marine sector. | |
| • | Rolls-Royce, together with Xanadu and Riverlane, demonstrated state-of-the-art quantum computing algorithms which can reduce airflow simulation times from weeks to less than an hour. As quantum computing matures, this technology has the potential to reduce prototyping runtimes by up to 1,000-fold in certain applications. | |
These strategic initiatives are continuing to expand the earnings and cash potential of the business.
Outlook and 2026 guidance
We expect significant further progress in 2026.
| 2026 financial guidance | |
| Underlying operating profit | £4.0bn-£4.2bn |
| Free cash flow | £3.6bn-£3.8bn |
Our free cash flow guidance for full year 2026 includes a £150m-£200m cash impact related to the supply chain, similar to 2025, with parts availability improving but still constrained. We are actively managing these challenges and are working to mitigate the impacts.
In Civil Aerospace, we expect 2026 large EFH will grow to 115%-120% of 2019 levels, alongside 550-600 total OE deliveries and 1,480-1,550 total shop visits. Our 2026 free cash flow guidance is based on Civil Aerospace net LTSA balance growth broadly similar to the prior year (2025: £0.6bn). Additional details are included in the results presentation and supplementary data slides.
Upgraded mid-term targets
Our strong delivery in 2025 and our actions to expand earnings and free cash flow gives us confidence to upgrade our mid-term targets. The increase in our mid-term operating profit and margin guidance is primarily driven by higher LTSA and time and materials profit in Civil Aerospace and stronger performance in power generation and governmental in Power Systems.
| Upgraded mid-term targets (2028) | Previous mid-term targets (2028) | |
| Group targets: | ||
| Underlying operating profit | £4.9bn-£5.2bn | £3.6bn-£3.9bn |
| Underlying operating margin | 18%-20% | 15%-17% |
| Free cash flow | £5.0bn-£5.3bn | £4.2bn-£4.5bn |
| Return on capital | 23%-26% | 18%-21% |
| Divisional margin targets: | ||
| Civil Aerospace | 21%-23% | 18%-20% |
| Defence | 14%-16% | 14%-16% |
| Power Systems | 18%-20% | 14%-16% |
Underlying operating profit is expected to increase from £3.5bn in 2025 to £4.9bn-£5.2bn in the mid-term and underlying operating margin from 17.3% in 2025 to 18%-20%; a strong delivery with highly competitive margins across all divisions:
· Civil Aerospace: We now target a mid-term margin of 21%-23% compared to 20.5% in 2025. We expect large EFH growth to be 130% to 140% of 2019 levels, alongside 650-750 total OE deliveries and 1,300-1,400 total shop visits in 2028. Higher operating profit will be driven by:
o Stronger widebody aftermarket performance across LTSA and time and materials.
o Improved widebody OE profitability as Trent XWB installed engine deliveries become breakeven or positive by the mid-term due to commercial optimisation and efficiency actions.
o A further increase in business aviation performance across both OE and aftermarket.
o Higher spare engine profitability reflecting commercial optimisation and mix.
o A reduced contribution from contractual margin improvements.
· Defence: We continue to target a 14%-16% margin in the mid-term compared to 14.4% in 2025. Higher operating profit will be primarily driven by:
o Stronger performance across all end markets, with higher aftermarket profit alongside increased OE volumes.
o Continued self-help actions.
o Productivity improvements due to capacity expansion.
· Power Systems: We now target a mid-term margin of 18%-20% compared to 17.4% in 2025. Higher operating profit will be driven by:
o Power generation OE revenue growth of around 20% per annum driven by data centres, with higher margins reflecting an improved product mix and efficiencies.
o Governmental OE revenue growth of around 20% per annum (previously 12%-14%) reflecting increased global defence spending.
o Marine OE revenue growth of 5%-7% per annum.
o BESS: double-digit OE revenue growth.
o Strong growth in service revenue will support margin improvements to the mid-term.
These targets are significantly underpinned by our strategic initiatives and the actions that we have taken across the Group and will be supported by further efficiencies to drive disciplined growth, including expanding our digital and GBS capabilities, as well as zero-based budgeting activities, all of which will drive a further improvement in our TCC/GM ratio.
Free cash flow of £5.0bn-£5.3bn in the mid-term compares to £3.3bn in 2025. Free cash flow will be driven by operating profit alongside continued growth of the Civil Aerospace net LTSA balance in the £0.8bn-£1.2bn range. LTSA balance growth reflects large EFH growth to 130% to 140% of 2019 levels, a higher average normalised EFH rate, the benefits of our time on wing initiatives with shop visits falling to 1,300-1,400 in the mid-term, alongside continued business aviation growth. Our mid-term targets assume a forecast achieved foreign exchange rate of $1.33/£ and the absence of a cash impact related to the supply chain.
Growth prospects beyond the mid-term
We see strong growth prospects from our existing businesses beyond the mid-term. These businesses are well positioned to benefit from key global trends, and we expect further performance improvement from self-help.
In Civil Aerospace, we have strong positions on leading platforms in both widebody and business aviation. With our young and growing widebody fleet, we see continued installed engine growth beyond the mid-term. Higher LTSA margins and continued LTSA balance growth will be supported by the full benefit of our strategic initiatives, notably the impact of our time on wing programme driving a proportionately lower number of shop visits, and a continued benefit from new, renewed, and renegotiated contracts with better terms. We also expect improving OE profitability, alongside further growth in business aviation. Our investment in UltraFan leaves us uniquely placed for the next generation of widebody aircraft.
In Defence, where we have growing visibility of future demand, we anticipate prolonged demand for our existing portfolio of profitable products including EJ200 and our AE engine family alongside the ramp up of new platforms. These new platforms will remain in service for decades to come and include AUKUS, B-52, GCAP, MV-75, and MQ-25, alongside a growing opportunity from autonomous platforms.
In Power Systems, growth will mainly be driven by power generation and governmental. We anticipate sustained power generation growth driven by data centres, where our strong market position will be supported by the introduction of our more power-dense next generation engine. In governmental, rising defence spending supports both land and naval applications, where we are the incumbent supplier on the main European NATO platforms, and we remain well positioned to support US growth. We also see opportunities for profitable growth in marine, rail, mining, and BESS.
In addition, we see additional growth opportunities from new businesses, which our transformation has unlocked.
Our unique nuclear capabilities, alongside existing customer commitments, means that we are well-placed to become a market leader in SMRs. We see a significant value creation opportunity with our differentiated SMR offering and expect Rolls-Royce SMR to be profitable and free cash flow positive by 2030, with strong profit and cash flow growth thereafter. We see further opportunity in the adjacent Advanced Modular Reactor (AMR) market, with these smaller, more flexible powerplants having potential applications in defence and commercial power.
We also see an opportunity to re-enter the large and growing narrowbody market, which offers attractive synergies to our existing widebody and business aviation activities, based on our UltraFan technologies. We would look to address this opportunity through a partnership.
Financial performance by business
| £ million | Underlying revenue | Organic change 1 | Underlying operating profit/(loss) | Organic change 1 | Underlying operating margin | Organic margin change 1 |
| Civil Aerospace | 10,382 | 15% | 2,130 | 41% | 20.5% | 3.9pt |
| Defence | 4,772 | 8% | 689 | 9% | 14.4% | 0.1pt |
| Power Systems | 4,892 | 19% | 852 | 60% | 17.4% | 4.5pt |
| All Other Businesses 2 | 13 | nm3 | (140) | nm3 | nm3 | nm3 |
| Corporate/eliminations | – | nm3 | (69) | -3% | nm3 | nm3 |
| Total | 20,059 | 14% | 3,462 | 38% | 17.3% | 3.2pt |
Trading cash flow
| £ million | 2025 | 2024 | ||
| Civil Aerospace | 2,512 | 2,030 | ||
| Defence | 745 | 591 | ||
| Power Systems | 658 | 452 | ||
| All Other Businesses 2 | 9 | (176) | ||
| Corporate/eliminations | (62) | (60) | ||
| Total trading cash flow | 3,862 | 2,837 | ||
| Underlying operating profit charge exceeded by contributions to defined benefit schemes | (37) | (31) | ||
| Taxation | (555) | (381) | ||
| Total free cash flow | 3,270 | 2,425 | ||
| 1 | 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 | |||
| 2 | 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) | |||
| 3 | nm is defined as not meaningful | |||
Civil Aerospace
| 2025 key Civil Aerospace operational metrics: | Large engine | Business aviation/ regional | Total | Change |
| OE deliveries | 259 | 224 | 483 | -9% |
| LTSA engine flying hours (millions) | 17.0 | 3.0 | 20.0 | +6% |
| Total LTSA shop visits | 1,079 | 361 | 1,440 | +10% |
| …of which major shop visits | 517 | 330 | 847 | +4% |
Higher Civil Aerospace operating profit reflected stronger large engine aftermarket performance, contractual margin improvements and spare engine profitability.
In 2025, large engine EFH rose by 8% to 111% of 2019 levels, driven primarily by new aircraft deliveries. Business aviation and regional EFH were broadly unchanged in the year. A total of 638 large engines were ordered in 2025 (2024: 494) with a gross book-to-bill of 2.5x (2024: 1.8x). The Trent XWB-97 and Trent 7000 were our bestselling engines in the year, with 226 and 212 orders, respectively. Significant new orders included Riyadh Air, IndiGo, and IAG. As a result of strong order intake, our large engine order book increased by 20% and now stands at 2,207 engines at the end of December 2025.
Total OE deliveries of 483 engines (2024: 529) were aligned to airframer production schedules, reflecting the impact of industry-wide supply chain issues. Business aviation deliveries were 224 (2024: 251) and large engine deliveries were 259 (2024: 278), which includes a slightly lower number of spare engine deliveries. Total shop visits increased by 10% versus the prior year to 1,440 (2024: 1,313), including a step-up in Trent 1000 shop visits in the second half of the year. Of the total shop visits, 517 were large engine major shop visits (2024: 430).
Underlying revenue of £10.4bn increased 15%, driven by a higher number of shop visits and commercial optimisation. Underlying OE revenue grew by 3% in the year to £3.2bn and services revenue grew by 21% to £7.2bn. LTSA revenue catch-ups were £279m (2024: £311m).
Underlying operating profit was £2.1bn (20.5% margin) versus £1.5bn in 2024 (16.6% margin). The increase in operating profit was driven by stronger large engine aftermarket performance across LTSA and time and materials, a larger contribution from contractual margin improvements, and improved spare engine profitability.
Our work on commercial optimisation and cost reduction across large engine and business aviation contracts supported gross contractual margin improvements of £553m (2024: £617m). These were primarily driven by the continued successful renegotiation of onerous contracts in the year, alongside the achievement of key time on wing milestones on the Trent XWB-84. These benefits were partially offset by £161m (2024: £382m) 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 £392m (2024: £235m), comprising contract catch-ups of £226m (2024: £290m) and net onerous provision releases of £166m (2024: charges of £55m).
Trading cash flow of £2.5bn was 24% higher than the prior year (2024: £2.0bn). The increase in trading cash flow was primarily driven by higher operating profit, partly offset by slightly lower year-on-year LTSA balance growth. LTSA balance growth net of RRSAs was £0.6bn (2024: £0.7bn), supported by continued EFH growth, a higher normalised EFH rate due to our commercial actions, with LTSA invoiced flying hour receipts of £6.0bn (2024: £5.5bn), offset by a higher number of shop visits.
Defence
Higher operating profit reflected stronger performance across transport and combat, partly offset by the absence of a one-off benefit in submarines in the prior year.
Defence’s order intake was £5.5bn with a book-to-bill ratio of 1.1x. We captured growing demand for our mature products, including AE 2100 and the EJ200 engine for the Eurofighter. New Eurofighter aircraft orders from Italy, Germany and Spain, alongside the recent commitment from Türkiye, now provides visibility of EJ200 OE production into the 2030s. In addition, we saw strong order intake for new programmes, including GCAP and MV-75, that will support strong revenue growth from the late-2020s. Defence’s order backlog at the year end stood at £17.4bn, equivalent to more than three years of revenue, with order cover of around 90% for 2026.
Underlying revenue grew by 8% to £4.8bn (2024: £4.5bn), with 20% growth in transport, 7% growth in combat, and 11% growth in naval, partly offset by 1% lower submarines revenue. Total OE revenue growth was 18% and services revenue growth was 1%. Excluding the impact of a one-off benefit in submarines revenue in the prior year 1, total revenue growth was 14%, services revenue growth was 11% and submarines revenue growth was 17%.
Key milestones in the year included the announcement by the international GCAP consortium of a major expansion of their partnership to accelerate the development of power and propulsion systems, the first MV-75 engine entering development testing, continued testing of the F-130 engine for the B-52, and the first engine delivery for the MQ-25 unmanned refuelling aircraft programme.
Underlying operating profit was £689m (14.4% margin) compared to £644m (14.2% margin) in the prior year. The year-on-year improvement reflected stronger performance in transport OE, driven by increased volumes and a more favourable mix including improved margins from international sales. Combat OE profit was also higher. This was partly offset by the absence of a one-off benefit in submarines in the prior year.
Trading cash flow was £745m compared to £591m in the prior year, driven by higher operating profit and a stronger working capital performance.
Power Systems
Significantly higher operating profit was driven by power generation, where we have captured profitable growth in data centres, and governmental.
Order intake was £6.1bn, a 21% increase compared to the prior year, with a book-to-bill ratio of 1.2x. OE order coverage for 2026 is 79%. Demand remains particularly strong in power generation, where order intake rose by 31%, and governmental where order intake rose by 15%.
Underlying revenue was £4.9bn, an increase of 19% versus the prior year. Power generation revenue growth was 30%, including data centre revenue growth of 35%. Governmental revenue growth was 14%, driven by both land and naval defence. Underlying OE revenue grew by 23% to £3.4bn. Underlying services revenue grew by 12% to £1.5bn.
Underlying operating profit grew by 60% to £852m. Underlying operating margin rose by 4.5pts to 17.4% (2024: 13.1%). The increase in operating profit was driven by significant profitable growth in power generation OE, stronger governmental services growth and our young and growing BESS business, which is now breakeven. Power generation growth was driven by data centres, where we continued to capture the benefits of volume, mix and commercial optimisation.
Trading cash flow was £658m compared to £452m last year. The increase in trading cash flow was mainly due to stronger operating profit, partly offset by higher investments and working capital to support disciplined business growth.
| 1 | Defence revenue in 2024 included a c.£220m benefit of a one-off capital and lease transaction |
