Rolls-Royce lifts outlook beyond forecast as all divisions power profit

By Paul Sandle

LONDON, July 30 (Reuters) - Rolls-Royce raised its full-year outlook far beyond market expectations on Thursday following a 46% jump in first-half operating profit, sending its shares more than 5% higher.

Rolls, whose Trent XWB-97 engines powered the ultra-long-range Airbus A350 that flew this week from Australia to France, improved the profitability of all of its divisions: civil aerospace, defence and power systems.

Its CEO Tufan Erginbilgic said his transformation of the British engineering company continued to deliver, with significant operational and strategic progress in the period.

"In Civil Aerospace, where we continued to improve our aftermarket profitability, we have also effectively eliminated aircraft on ground, providing a significant operational benefit to our customers," he said in a statement.

Rolls said it now expected to make £4.7 billion to £4.9 billion in underlying operating profit. It had previously forecast £4.0 billion to £4.2 billion and analysts were expecting £4.2 billion before Thursday's update.

In civil aerospace, Rolls increased its margin to 25.3%, from 24.9%, driven by operational improvements in its business maintaining and servicing its engines and more profitable contracts with its airline customers.

In its power systems business, Rolls said it was seeing increased demand led by data centres, both for back-up and as the main power source. Erginbilgic said the latter offered greater opportunities for aftermarket revenue.

The outlook in defence was also bright, underpinned by Britain's 10-year investment plan, Rolls said.

"This performance is driven both by strong sales, 11% above consensus, (...) but also meaningful margin uplift across all divisions," said analysts at Jefferies, adding it was an "exceptional" first-half.

Rolls reported £2.5 billion ($3.34 billion) in underlying operating profit for the first half, a rise of 46%, while free cash flow increased to £2.0 billion.

($1 = 0.7487 pounds)

(Reporting by Paul Sandle; Editing by Kate Holton, Sarah Young and Alexander Smith)