Rolls-Royce Shares Surge Following Engine Improvements and Profit Boost

By Paul Sandle

LONDON (Reuters) -British aero-engineer Rolls-Royce raised its full-year profit and cash flow outlook on Thursday after improvements to its widebody jet engines drove strong first-half results, pushing its shares to an all-time high.

The stocks were up 9.1% at 0915 GMT after jumping 11%, continuing a stellar performance since Tufan Erginbilgic joined as chief executive in 2023 promising to revamp the company whose engines power Airbus's widebody planes and some Boeing 787s.

The stock is up 400% in the last two years.

Erginbilgic said his transformation was delivering and there were "substantial growth prospects beyond the mid-term".

"We are expanding the earnings and cash potential of Rolls-Royce despite the challenges of supply chain and tariffs," he told reporters.

The company raised the top end of its operating profit guidance by 300 million pounds ($400 million) to 3.2 billion pounds and its free cash flow by 200 million pounds to 3.1 billion pounds.

Rolls had improved the time its engines spend "on wing" - when they are in operation before needing major maintenance - Erginbilgic said.

That helps drive profits, as Rolls makes money from its engines' flying hours.

By increasing durability, Rolls is expecting to deliver a more than 80% improvement in time on wing for its Trent engines by 2027.

Problems with the Trent 1000, which powers the 787, has caused disruption for British Airways, Virgin Atlantic and others. Rolls competes with General Electric's GEnx-1B on 787s.

It said an improved blade certified in June would more than double the time on wing, although it cautioned that Trent 1000 shop visits would increase in the second half.

After the upgrades, time on wing would increase to as much as six years, Erginbilgic said. "That makes the Trent 1000 a very, very competitive engine."

Rolls' power systems business had grown by winning business from data centre and government customers, he said.

The company's small modular reactor programme was selected last month by Britain to build three units.

U.S President Trump said on Monday the technology was "interesting" when he met British Prime Minister Keir Starmer.

Erginbilgic said the focus was on executing opportunities in Britain and the Czech Republic. "There is good demand on SMRs, even without the U.S.," he said.

The company, which also has a defence business, reported underlying operating profit of 1.7 billion pounds for the first half, with an operating margin of 19.1%, up from 14.0%.

($1 = 0.7484 pounds)

(Reporting by Paul Sandle; editing by Sarah Young and Philippa Fletcher)