Rolls-Royce has reported another year of robust strategic and financial progress in 2025, with marked improvement across all key financial indicators. Over the past three years, its transformation programme has delivered a step-change in performance, generating higher operating profit and free cash flow while capital expenditure has doubled. The group continues its evolution into a high-performing, competitive, resilient and growth-oriented business. This stronger financial delivery has been achieved despite a challenging external environment, including ongoing supply chain constraints, which are being actively managed.
Underlying operating profit rose to £3.5 billion in 2025, up from £2.5 billion in 2024, with the operating margin increasing to 17.3% from 13.8%. Civil Aerospace recorded an underlying operating margin of 20.5%, compared with 16.6% the previous year, driven by improved performance in the large engine aftermarket, contractual margin enhancements and stronger profitability in spare engines. Defence achieved an underlying operating margin of 14.4%, slightly ahead of 14.2% in 2024, reflecting improved results across transport and combat programmes and the absence of a prior-year one-off benefit in submarines. Power Systems delivered an operating margin of 17.4%, up from 13.1%, supported by growth in power generation, particularly in data centres and government-related demand. Group-wide profitability gains were reinforced by continued efficiency and simplification measures.
Free cash flow increased to £3.3 billion from £2.4 billion in 2024, supported by higher operating profit, sustained growth in long-term service agreement balances and strong working capital performance, partially offset by net investment. Net cash stood at £1.9 billion at year-end, compared with £475 million a year earlier. Gross debt fell to £2.8 billion following bond repayment, while liquidity remained strong at £8.7 billion. The Group’s cost discipline and operational efficiency have strengthened resilience and reduced volatility in free cash flow. (£1.00 = US$1.35 at time of publication).
