2012 Half-Year Results - Rolls-Royce Holdings/media/Files/R/Rolls... · (£m) HY 2012 FY 2011...

2012 Half-Year Results Data pack

1 Trusted to deliver excellence

Section Page

1. About the Group 03

2. Financials 13

3. Key Performance Indicators 27

4. Details by Business Sector 29

5. Additional Information 62

Trusted to deliver excellence 2

Table of contents

1. About the Group Data pack



Consistent power systems strategy

Civil Aerospace Defence Aerospace Marine Energy

• Over 12,000 engines

• Power 25 types of aircraft

• 18,000 engines

• 24 engine programmes

• 103 countries

• 160 armed forces

• 25,000 propulsion units

• 2,500 customers

• 70 navies

• Products on 30,000 vessels

• 4,000 power systems

• 1,600 customers

• 120 countries

• 70% of service revenue

covered by LTSAs - TotalCare

• 25% of service revenue covered

by LTSAs - MissionCare

• 5% of service revenue covered

by LTSAs – mainly Naval

• 25% of service revenue

covered by LTSAs

HY 2012 revenue £3,034m HY 2012 revenue £1,134m HY 2012 revenue £1,070m HY 2012 revenue £445m

HY 2012 ROS 10.2% HY 2012 ROS 17.3% HY 2012 ROS 13.7% HY 2012 ROS (1.1%)


Four global markets

Services 51%

Development 5%

OE 44%

Services 57%

OE 43%

OE 58%

Services 42%

Services 60%

OE 40%

Underpinning long-term growth


Broadening our portfolio

0

10

20

30

40

50

60

70

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 HY 2012

Order Book (£bn)

Europe North America Asia / Middle East ROW IAE Removal**

*Firm and announced order book stated on a constant currency basis

**£4.5bn orders removed from Order book on completion of IAE restructuring

Substantial order book provides long-term visibility

HY 2012 £60.1bn


Substantial order book*


Balanced business portfolio

Aftermarket Services 53%

Civil 23%

Defence 10%

Marine 11%

Energy 3%

Engine Holding 1%

£m HY 2012 HY 2011

Underlying revenue 5,757 5,463

Underlying services revenue 3,034 2,872

An increasingly resilient portfolio

0%

100%

200%

300%

400%

500%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Order Book Revenue EPS

9/11

SARS

Gulf War II

Weakening US$

Commodity Inflation

Programme Delays Financial Crisis


Managing challenges

0%

20%

40%

60%

80%

100%

0

2

4

6

8

10

12

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

% £bn

Underlying Services Revenues Underlying OE Revenues Services as % of Total

Growing installed based provides decades of aftermarket opportunities

10Y CAGR

OE 5%

Services 9%


Growing Group revenues

• Our capabilities reflect continuous R&D investment over decades

• R&D is a major structural competitive advantage, securing a market-leading position in wide body aircraft

• R&D improves ongoing engine performance, reducing LTSA costs and improving profitability

• 2012 guidance is for a significant increase in P&L charge due to higher spend and lower net capitalisation primarily

caused by timing of new engine programmes


Research & development

Continuous investment in future technology protects barriers to entry

£m £m

Total gross R&D spend (10Y) 7,462 Total net R&D spend (10Y) 4,021

0%

1%

2%

3%

4%

5%

6%

0

200

400

600

800

1,000

1,200

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Gross R&D Net R&D Net R&D as a % of Sales

(£m)

Debt maturities

Strong liquidity position – Total liquidity £3.15bn

• S&P raised its long and short term R-R credit ratings to ‘A/A-1’ from ‘A-/A-2’, with a stable outlook

• ‘A’ credit rating and liquidity all provide confidence for:

• Customers signing long-term service agreements

spanning decades

• Customer and supplier financing

• Investing in opportunities at the right time

• Suppliers and JV partners making long-term

investments

• Weathering financial market uncertainties

(£m)

Average net cash


A strong balance sheet

-1000

-500

0

500

1000

1500

2005 2006 2007 2008 2009 2010 2011 HY 2012

-

500

1,000

1,500

2012 2013 2014 2015 2016 2017 2018 2019

Drawn Undrawn

2. Financials Data pack



Historic financial highlights Full Year

FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Underlying revenue (£m) 7,817 9,147 10,180 10,866 11,277

Underlying profits before tax (£m) 800 880 915 955 1,157

Underlying EPS 34.06p 36.70p 39.67p 38.73p 48.54p

Net cashflow (£m) 62 570 (183) 258 (1,310)

Average net cash (£m) 350 375 635 960 320

Order intake (£bn) 28.4 20.4 14.1 12.3 16.3

Order book (£bn) 45.9 55.5 58.3 59.2 62.2

Dividend per share 13.00p 14.30p 15.00p 16.00p 17.50p


Historic financial highlights Half Year

HY 2008 HY 2009 HY 2010 HY 2011 HY 2012

Underlying revenue (£m) 4,211 4,923 5,259 5,463 5,757

Underlying profits before tax (£m) 410 445 465 595 637

Underlying EPS 17.15p 19.64p 18.72p 23.89p 26.54p

Net cashflow (£m) (44) (428) 113 (82) 646

Average net cash (£m) 265 760 915 780 (590)

Order intake (£bn) 11.8 7.9 5.4 8.7 9.1

Order book (£bn) 53.5 57.5 58.4 61.4 60.1

Dividend per share 5.72p 6.00p 6.40p 6.90p 7.60p


Headline to underlying adjustment

Revenue Profit before financing

(£m) HY 2012 HY 2011 HY 2012 HY 2011

Headline 5,720 5,364 1,280 716

FX gain/(loss) 37 99 40 61

Amortisation of Intangibles 42

Pensions (130)

Acquisitions (700)

Other 6 (28)

Underlying 5,757 5,463 668 619


Underlying income statement

(£m) HY 2012 HY 2011

Underlying revenue 5,757 5,463

Underlying gross profit 1,294 1,193

Commercial and administrative costs (462) (470)

Net R&D charge (285) (210)

Other Income & costs 120 106

UPBFCT 668 619

Net financing charge (31) (24)

UPBT 637 595

Tax (140) (153)

Minority interests (6) -

UPAT 491 442

Underlying EPS (p/share) 26.54p 23.89p

Payment to shareholders (p/share) 7.60p 6.90p


Underlying financing costs

(£m) HY 2012 HY 2011

UPBFCT 668 619

Interest (payable) / receivable (20) (14)

Financial RRSPs (5) (5)

Interest rate swaps 1 (2)

Other (7) (3)

Underlying net finance charge (31) (24)

UPBT 637 595


Summary balance sheet (£m) HY 2012 FY 2011

Intangible assets 2,865 2,882

Property, plant and equipment 2,394 2,338

Net post retirement scheme deficits (570) (397)

Net working capital (796) (1,098)

Net funds 869 223

Provisions (457) (502)

Net financial assets and liabilities (646) (718)

Share of results of joint ventures and associates 1,833 1,680

Assets held for sale 5 178

Other net assets and liabilities (16) (67)

Net assets 5,481 4,519

Other items HY 2012 FY 2011

USD hedge book 24,100 22,000

Net TotalCare assets 1,124 957

Cash flow during the year (£m) HY 2012 HY 2011

Net cash inflow from operating activities 150 457

Net cash inflow / (outflow) from investing activities 770 (351)

Net cash (outflow) from financing activities (31) (448)

Net change in cash and cash equivalents 889 (342)

Other changes in net funds (245) 396

Net increase/(decrease) in net funds 644 54

Opening net cash 1st January 117 1,335

Net increase/(decrease) in net funds 644 54

Fair value of swaps hedging fixed rate borrowings 108 62

Net funds flow 752 116

Closing net cash 30th June 869 1,451

Average net cash (590) 780


Group cash flow


Half year analysis

Year on Year Half on Half

H1 2012 H1 2011 Change H2 2011 Change

Order book (£bn) 60.1 56.8* 6% 57.6* 4%

Underlying revenue (£m) 5,757 5,463 5% 5,814 (1%)

Underlying OE revenue (£m) 2,723 2,591 5% 2,667 2%

Underlying Services revenue (£m) 3,034 2,872 6% 3,147 (4%)

UPBT (£m) 637 595 7% 562 13%

Net cash (£m) 869 1,451 223

Average Net cash (£m) (590) 780 320

*H1 2011 order book restated to exclude IAE orders of £4.6bn

**H2 2011 order book restated to exclude IAE orders of £4.6bn


Research & development Full Year

£m 2007 2008 2009 2010 2011

Gross R&D (824) (885) (864) (923) (908)

Net R&D (455) (490) (471) (506) (520)

Capitalised 91 113 121 111 93

Amortised (18) (26) (29) (27) (36)

R&D charged to Income Statement (382) (403) (379) (422) (463)

R&D P&L charge % of underlying revenues 4.9% 4.4% 3.7% 3.9% 4.1%

Half Year

£m H1 2008 H1 2009 H1 2010 H1 2011 H1 2012

Gross R&D (399) (440) (436) (431) (428)

Net R&D (222) (246) (238) (243) (275)

Capitalised 57 61 60 52 15

Amortised (12) (15) (14) (19) (25)

R&D charged to Income Statement (177) (200) (192) (210) (285)

R&D P&L charge % of underlying revenues 4.2% 4.1% 3.7% 3.8% 5.0%


Foreign exchange

1.5

1.6

1.7

1.8

0

5

10

15

20

25

30

2008 2009 2010 2011 2012

Cover (£bn) Average rate in book (RHS)

H1 2012 H1 2011 FY 2011

Period end-spot

USD 1.57 1.61 1.55

Euro 1.24 1.11 1.2

NOK 9.32 8.61 9.27

Period average rates

USD 1.58 1.62 1.6

Euro 1.22 1.15 1.15

NOK 9.21 9.01 8.99

Headline PBT for HY 2012: £1,308m (HY 2011: £1,137m)

FX effect primarily caused by

• USD and EUR spot rate changes during H1 2012

compared to 2011 in year movements. Impact on

headline PBT = (£79m)

• Revaluations of financial instruments

• Overseas businesses impacted by translation rates

(€, $ and NOK)

Underlying profit performance (UPBFCT) impacted by

£8m

• Translation headwind £(8)m

• Transaction benefits £0

Good visibility of improving achieved rates

• Continuing to take US$ cover

• US$ hedge book at $24.1bn with average rate of

$1.59 at 30 June 2012

• On average the net exposure is $3.5Bn~$4bn per

annum – more than 5 years cover in place

• UK pension schemes make up around 90% of gross liabilities; 95% of gross assets

• Significantly reduced risk and volatility over the last five years

• UK defined benefit schemes closed to new members in 2007

• £500m special injection in 2007

• More than 80% of assets in lower risk, liability driven investments (LDI)

• Longevity swap provides greater certainty over future funding requirements

• UK schemes

• Surplus of £110m (calculated on an IAS19 basis*)

• H1 2012 contributions of £143m including £50m of deficit reduction payments

• Level of contributions expected to continue in H2 2012

• Triennial review underway on RRPF

• Overseas Schemes

• Deficit of (£680m) (IAS19 basis*) principally made up of unfunded US healthcare schemes (£500m)

• H1 2012 contributions of £20m

• Level of contributions expected to continue in H2 2012

Prudent pension management has reduced risk


Pension risks substantially reduced

*IAS19 reporting basis discounts liabilities using a AA bond rate – while this is the required reporting method it does not match the

method used to manage the pension schemes which discounts liabilities using a swap curve to match the LDI portfolio.

• Selective and designed to minimize risk:

• Board guidelines limit gross and net exposures by counterparty, product type and year

• Commitments continually monitored with suitable management policies in place

• Exposures audited twice yearly with independent asset value appraisals

• Stable contingent liabilities – as of June 30th 2012:

• Total Gross Exposure: US$944m;

• Total Net Exposure (less security): US$120m;

• Total Stressed Exposure (assumes 20% asset discount): US$228m

• Liabilities are spread across multiple geographies, customers and aircrafts

Strong financial position allows the Group to provide financing support to customers in the

form of guaranteed financing, asset-value guarantees and leasing transactions


Customer finance

Group guidance Revenue Growth Profit Growth

Group Good Good

Civil Good Strong

Defence Modest Modest

Marine Modest Broadly flat

Energy Broadly flat Some improvement

Foreign Exchange Neutral - no impact on profits

Tax Rate Underlying tax rate expected around 22%, down from 24% as originally

guided due to the timing effect of Tognum

R&D

Modest increase in expenditure

Significant increase in P&L charge due to higher spend and lower net

capitalisation primarily caused by timing of new engine programmes

Capital Expenditure Modest increase in expenditure - including increased IT investment

Intangible Assets

Modest increase due to a modest increase in Recoverable Engine Costs

partially offset by a reduction in capitalised development costs caused by

timing of new engine programmes

Pensions No material changes expected to funding levels


3. Key performance indicators Data pack


Selection of Group KPIs FY 2007 FY 2008 FY 2009 FY 2010 FY 2011

Capital Expenditure (£m) 304 283 291 361 467

Engine Deliveries 1,439 1,621 1,600 1,657 1,853

Installed Thrust (m/lbs) 334 348 367 382 400

Percentage of Civil Fleet

Under Management 55% 57% 59% 70% 68%

Return on Capital Employed* 17.2% 17.1% 17.2% 17.3% 17.8%

*Return on capital employed is calculated as the after-tax underlying profit, divided by the average net assets during the year,

adjusted for net cash, net post-retirement deficits, and goodwill previously written off.


Group KPIs

4a. Details by business sector – Civil Data pack


Widebody 58%

Narrowbody 9%

Corporate and Regional

33%

Services 57%

OE 43%

OE volume drives revenue growth

• Growth coming from >50% market share of the largest widebody fleet replacement cycle and market expansion in history

• Trent engine family powers most major widebody platforms; over 2,000 in service with around 2,400 in the order book

• Further order book growth potential via sole share of A350, with an opportunity for an additional 2,500 Trent engine units

Operational leverage in OE and Services

• Significant increase in Trent unit volumes provides better opportunity to absorb fixed costs

• Operational leverage applies not only to OE but also to services that represented 60% of FY11 Civil Aerospace revenue

Competitive advantage of high LTSA coverage

• LTSAs allow better matching of load vs. capacity by managing the timing and scope of maintenance

• LTSAs rising from 70% H1 2012 services revenue to over 90% over the next decade


Civil Aerospace H1 2012 underlying revenues = £3,034m

0

100

200

300

400

500

600

700

1988 1992 1996 2000 2004 2008 2012 2016 2020

m/l

bs

of

ins

tall

ed

th

rus

t

V2500 @ 50% Corporate & Regional Trent RB211

H1 2012

350 m/lbs

*Installed thrust is shown net of retirements and includes 50% of the V2500 programme up to to H1 2012


Growth in the installed base OE volume drives revenue growth • Growth coming from >50% market share of the largest widebody fleet replacement cycle and market expansion in history

• Trent engine family powers most major widebody platforms; over 2,000 in service with around 2,400 in the order book

• Further order book growth potential via sole share of A350, with an opportunity for an additional 2,500 Trent engine units

Launch engine

Engine

Market share

(Aircraft)

Trent 800

Trent 500

Trent 900

Trent 1000

Trent XWB

Engines in

service

58% 40% 100% 43% 41% 100%

= 2,096 914 450 524 180

Market leader

28

Trent 700

Firm Trent order book around 2,400 engines

50% market share of firm backlog on widebody platforms


Market leader in large aircraft

• IAE restructuring completed

• $1.5bn cash received on completion (excluded from Group level guidance)

• Headline profit on disposal of £700m (excluded from underlying profit figures)

• Order Book – Civil order book reduced by £4.5bn

• Ongoing revenue based on a $/EFH basis for 15 years

• Rolls-Royce continues engineering, component manufacturing and final assembly activities

• Civil Aerospace operating profit uplift circa £140m higher in first 12 months after completion;

guidance is for £70m uplift in H2 2012

• Joint venture announced with P&W to develop new engines for

future generation mid-size aircraft

• Focus on high bypass geared technologies

• Equal partnership with both bringing unique capabilities

• Subject to regulatory approval


The mid-size strategy

0

5

10

15

20

25

30

0

200

400

600

800

1,000

1,200

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Widebody Narrowbody* Corporate and Regional Delivered Thrust* m/lbs

• Rolls-Royce powers 25+ types of commercial aircraft

• With around 3,300 engines in the Civil Order book, deliveries will grow strongly


Civil engine deliveries Delivered

Engines

Delivered

Thrust* (m/lbs)

*Delivery of engines and thrust are shown net of retirements and includes 50% of the V2500 programme until completion of IAE restructuring


Civil engine deliveries Number of engines

2003 2004 2005 2006 2007 2008 2009 2010 HY

2011 2011

HY

2012

Widebody 169 171 170 203 145 193 225 185 110 224 125

Narrowbody* 216 237 327 319 308 351 347 371 198 418 220

Corporate and Regional 361 416 384 334 398 443 272 290 154 320 188

Civil Total 746 824 881 856 851 987 844 846 462 962 533

*Engine Deliveries are shown net of retirements and includes 50% of the V2500 programme until completion of IAE restructuring

Value to Customers Value to Rolls-Royce

Predictable costs Expand revenue opportunity

Supports outsourcing strategies Manage overhaul load and capacity effectively

Flexible contract design Incentivises cost reduction

Risk transfer Best positioned to manage risk

Features

• Key assumptions: Utilisation of engines; material and labour costs; inflation; FX; frequency and scope of overhaul

• TotalCare has been available on widebody since 1997

• Growing installed base of products with useful lives of >25- years results in stable, long-term annuity of services

revenue = 53% FY11 revenue

• The OEM is best placed to own and manage life-cycle product costs leading to improved cost efficiencies in

LTSAs and reduced customer disruption

• LTSAs allows better matching of load vs. capacity by managing the timing and type of maintenance performed

• LTSAs rising from 68% FY11 services revenue to over 90% over the next decade

• We can use decades of Civil LTSA experience to better serve customers in Defence, Marine and Energy


TotalCare – A powerful model

Adding value for Rolls-Royce and our customers

• Margin booked progressively reflecting latest view of actual performance compared with assumptions

• Cash flow reflects a combination of steady flying hour ($/EFH) receipts through the contract and periodic overhaul spend

• Difference between cash received and profit booked is recorded as either a trade receivable or payable depending on the

position of the contract

Contract Profits


TotalCare – A powerful model Example below shows a launch customer with OE losses linked to an LTSA, and a stable margin assumed

throughout the contract.

2003 2004 2005 2006 2007 2008 2009 2010 HY

2011 2011

HY

2012

Widebody 175 183 193 202 209 215 226 235 240 246 253

Narrowbody* 27 30 33 37 41 45 49 54 56 58 0

Corporate and Regional 72 75 78 81 84 88 91 93 96 96 97

Civil Total 274 288 305 320 334 348 367 382 392 400 350

*Installed thrust is shown net of retirements and includes 50% of the V2500 programme until completion of IAE restructuring


Civil installed thrust Millions of pounds (m/lbs) of installed thrust* in service


Installed base by age Total installed thrust* – 350 m/lbs – June 2012

0%

10%

20%

30%

40%

50%

0-10 years 11-20 years >20 years

Age of Aircraft

Widebody Corporate and Regional

Younger, more fuel efficient aircraft are typically parked last

4b. Details by business sector – Defence Data pack


Services 51% Development

5%

OE 44%

Transport 59%

Combat 33%

UAV/Trainer 8%


Defence Aerospace H1 2012 underlying revenues = £1,134m

Broad and Diverse Portfolio

• Installed base of 18,000 engines includes 24 engine programmes in 103 countries with 160 armed forces

• Broad portfolio and large installed fleet positions the Defence business well to meet the challenges of customer

budget pressures

Resilient characteristics of military transport market

• Market leader in military transport market with stable customer flying hours experienced over the last 5 years

Opportunities to increase LTSA coverage

• Budgetary pressures and customers’ requirements for increased value and more flexible contracts provide

opportunities for additional services and collaboration

• Such contracts will increase LTSA coverage and drive operational efficiencies

Engine Platform(s)

Combat Jets

>1,500 engines in service

EJ200 Eurofighter Typhoon

Adour SEPECAT Jaguar BAE Hawk Mitsubishi F-1

Pegasus Harrier

RB199 Tornado

Rolls-Royce LiftSystem F35

Trainers


Adour BAE Hawk T-45 Goshawk

FJ44 Saab SK60

Transport


AE1107C V22 Osprey

AE2100 C130 J Hercules

T56 C130 A-H Hercules P-3C Orion E-2C Hawkeye

TP400 A400M

AE3007 Global Hawk EMB45

Helicopters


MTR390 Eurocopter Tiger

RTM322 Blackhawk Apache NHI NH90

CTS800 Super Lynx 300

Gem Lynx

Gnome Augusta Westland Sea King


Defence portfolio

T800 engine

launched

GE & Rolls-

Royce team for

JSF

Allison purchase

brings T-56 & AE

2100 markets

EJ200

enters

service

Deal to power 72 aircraft with

EJ200 from Saudi Arabia

RTM322 enters

service with

Royal Navy

AirTanker

awarded

UK Tanker

contract

Oakland R&O base

purchased in US

Global Hawk

UAV passes

10,000 hours

service

Tranche

3a

Typhoon

contract

signed

First flight of

A400M powered

by TP400

Full production of

AE1107C for V-22

STOVL - 1st

Vertical

Engagement of

LiftSystem

AV-8B enters service

2012 2010 2008 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988

EJ200 engine

in first combat

deployment

Engine certification

for TP400 in A400M


Developing the Defence business

• Installed base of 18,000 engines includes 24 engine programmes in 103 countries with 160 armed forces

• Market leader in military transport market with stable customer flying hours experienced over the last 5 years

Number of Engines

0

100

200

300

400

500

600

700

800

900

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Transport Helicopters Combat Trainers / Other


Defence engine deliveries

Increasing installed base delivers aftermarket revenues for decades

2003 2004 2005 2006 2007 2008 2009 2010 HY

2011 2011

HY

2012

Transport 124 121 120 117 134 133 218 265 122 289 131

Helicopters 257 242 332 285 271 264 323 343 153 412 197

Combat 73 94 80 71 64 93 103 102 53 103 62

Trainers / Other 56 52 33 41 26 27 18 0 2 10 3

Defence Total 510 509 565 514 495 517 662 710 330 814 393


Defence engine deliveries

4c. Details by business sector – Marine Data pack


OE 58%

Services 42%


Marine H1 2012 underlying revenues = £1,070m

Offshore 45%

Merchant 22%

Naval 33%

Ship design capability

• Rolls-Royce designs ships, selecting products from its own market-leading portfolio to create integrated ship solutions

• Rolls-Royce design + OE capabilities = c. 60% ship contract value

• Recent investment in global network of 36 services centres = opportunity to capture better share of services market

Opportunities from stricter emissions requirements

• International Maritime Organisation beginning strict emissions limits in 2016

• Drives OE and services opportunities for ship designers with broad product portfolios

Long-standing nuclear capabilities in Naval

• Unique capabilities in pressurised water reactors for the UK MoD’s nuclear powered submarine fleet

Price of oil

• High price of oil drives significant activity around deepwater offshore exploration for oil, increasing demand for

products and services in developing markets, such as Brazil

Market Sector Description Products

Offshore

Supply of vessels benefit from cutting-edge

technology, providing safe, flexible and

reliable solutions - purpose fitted to support

the offshore oil & gas drilling industry

Full ship design, allowing integration of

propulsion, motion control, winches and deck

handling and power plant systems

Merchant

Decades of experience in designing,

developing and equipping vessels in the

cargo, tugs and workboats, passenger, and

luxury yacht sectors

World leading range of propulsion and

manoeuvring systems for tugs and workboats

Environmental rules are driving innovation in

low emissions

Naval

Supply of power systems and auxiliary

equipment to a range of naval applications;

from patrol and supply vessels to

conventional combatants and more recent

fast attack craft

Pioneered the development of nuclear power

for the UK submarine fleet

Active role in developing new technologies

for the future

Requirements for more power and greater

flexibility. Rolls-Royce MT30 gas turbine

selected for US Littoral Combat Ship and two

new UK aircraft carriers

Supply and support of nuclear power

systems on the entire UK submarine fleet,

including the new Astute class


Marine – Business overview


Marine Order Trends

0

1

2

3

4

5

6

0

0.5

1

1.5

2

2.5

3

H1 2007 H2 2007 H1 2008 H2 2008 H1 2009 H2 2009 H1 2010 H2 2010 H1 2011 H2 2011 H1 2012

£bn £bn

Order intake OE Sales Order Book (Right hand axis)

Order intake is a lead indicator for revenue growth

Deck Machinery

Propulsion

Commissioning

Engine

Ship Design

Labour

Steel

0%

20%

40%

60%

80%

100%

• Ship Design is a key enabler

• Design stage allows Rolls-Royce to fully

integrate all high technology systems

• Rolls-Royce supplies the highest value-add

components

• Integrated systems and deep product

knowledge strengthens long-term service

offerings

Rolls-Royce Key Enabler

Non Rolls-Royce Scope

Rolls-Royce Scope


Unique capabilities for Offshore Rolls-Royce designs and integrates complex systems

4d. Details by business sector – Energy Data pack


Oil & Gas 56%

Power Generation

34%

Civil Nuclear 11% Services

60%

OE 40%


Energy H1 2012 underlying revenues = £445m

Global energy demand outstripping available supply

• Global demand will require a range of energy solutions

Price of oil

• High price of oil drives demand for compression and pumping engines in the oil & gas sector

Power generation in developing markets

• Well-positioned to capture demand for localised energy production in less developed regions where power generation

infrastructure is nascent

Long-term opportunities in Civil Nuclear

• Rolls-Royce has acquired over many years unique instrumentation & controls, inspection and component capabilities

in Civil Nuclear to support the growing ambitions of the major primes

53


Oil & Gas

Rolls-Royce utilises its gas

turbine technology, coupled

with its centrifugal

compressors, to provide a full

product range for gas

compression and oil pumping

duties both on and offshore.

RB211

Aero-derivative

650 units

worldwide

24 million hours

operational experience

Avon

Aero-derivative 1,200 units

60 million hours

operational experience

Barrel compressors >700 units Huge experience in

natural gas handling

Pipeline

compressors 950 units Up to 90% efficiency

Power

Generation

Rolls-Royce offers a wide

range gas turbine based

solutions for the power

generation market, backed up

by a comprehensive range of

service solutions

More than 130 million hours of

operating experience with

industrial gas turbines.

501-K

Aero-derivative

500 customers

40 countries

60 million hrs operating

experience

Trent 60

The most advanced aeroderivative

industrial gas turbine available today.

Delivering up to 64MW of electric power in

simple cycle service, the Trent 60 has

established a new benchmark for fuel

economy and cost savings.

Oil & Gas Power Generation Civil Nuclear Low Carbon

Technology


Energy – Business overview


Civil Nuclear

Instrumentation and Control

Systems

Delivering technology and services to improve the reliability,

availability and safety of nuclear plants. Rolls-Royce systems are

installed in over 200 nuclear reactors across 20 countries worldwide

Mechanical Systems and

Component Engineering

Rolls-Royce offers full engineering service, including analysis,

design, manufacturing, specialist procurement and supply of key

components for steam supply and

Safety, Licensing and

Environmental Engineering

An integrated approach to environmental management is a key part

of our project delivery, encompassing radiological and

environmental impact assessment and radiation dose modelling.

Reactor Support Services

Rolls-Royce aims to maximise safety and plant availability, minimise

unplanned outages and achieve optimal performance for our

customers.

Low Carbon

Technology Tidal Power Generation

The prototype tidal turbine, located subsea off the Orkney Islands,

Scotland, has successfully generated and fed over 100 megawatt

hours (MWh) of electrical power into the national grid.

Oil & Gas Power Generation Civil Nuclear Low Carbon

Technology


Energy – Business overview

• MoUs with AREVA, Westinghouse, EdF, Larsen & Toubro (India) and Rosatom

(Russia)

• World-leader in safety-critical digital instrumentation and control systems (I&C) for

nuclear reactors, Rolls-Royce has nuclear I&C systems installed in over 200

reactors across 20 countries.

• Rolls-Royce has I&C systems in all 58 reactors in France and contracts in place to

supply systems to more than 70% of reactors in operation or under construction in

China today

• Through our teaming arrangement with Westinghouse, we provide reactor

inspection services to 70% of all pressurised water reactors in the US

• Growing demand for safety systems and service on existing reactors.

Rolls-Royce is a critical supplier in the Civil Nuclear market


Energy – Civil Nuclear

4d. Details by business sector – Engine Holding


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Description Products

Bergen

Bergen AG is a leading

developer and producer of

medium speed diesel and gas

propulsion engines

and generator sets.

Diesel Engines

Our medium-speed Bergen diesel engine

portfolio comprises established and newly

developed models in the 1.8 to 8MW power

range.

Gas Engines

Bergen lean-burn gas engines are meeting

the emerging market for low-emission

propulsion and are the cleanest and most

efficient on the market available in powers

from 1.4 to 7MW.

Tognum

Engines

The product portfolio of the Engines business unit comprises MTU

engines and propulsion systems for ships, for heavy land, rail and

defence vehicles and for the oil and gas industry.

On-site Energy and

Components

The On-site Energy business unit supplies distributed power

generation systems carrying the MTU Onsite Energy brand. These

comprise diesel engines for emergency power, prime power and

continuous power, as well as cogeneration power plants based on

gas engines and gas turbines that generate both power and heat.

Bergen AG Tognum


Engine Holding

In March 2011 Rolls-Royce and Daimler announced JV offer for Tognum, a leading

manufacturer of high speed diesels used in Marine, Energy and industrial applications

• Engine Holding (JV) today owns over 99% of Tognum

• Court has granted the right to “squeeze out” the minority shareholders, subject to customary court

appeals process, which is ongoing

• Rolls-Royce and Daimler have appointed representatives to the supervisory board

Tognum JV provides strong growth opportunities

• Our Marine ship design business and service business model provide opportunities to grow the

aftermarket business

• Tognum’s Energy solutions business complements our power generation business

• We see further synergy opportunities in oil & gas markets

• Daimler brings expertise in high volume manufacturing and global market access

• Preliminary 2011 financials of €345m in EBIT

Future Plans

• Develop the roadmap for growth

• Equity account until transaction is complete

• No financial guidance for Tognum until process is complete


Tognum joint venture

Bergen diesel engine business transfers into Engine Holding


Bergen – Transfer to Engine Holding

Marine

• Bergen sells diesel engines to Rolls-Royce Marine

• Rolls-Royce Marine sells engines as part of a

package to the end customer

• Transfer of Bergen from Marine moves profit earned

to Bergen (Engine Holding) segment

• Marine revenues unchanged as sales to end

customer are unchanged

• Intersegment sales (Bergen to Marine) are

eliminated at Group level

Energy

• Bergen sells diesel engines direct to power

generation customers - all revenue and profit are

realised in Bergen.

• Before the Bergen transfer, revenues and profits

flowed through Energy segment results

• Transfer of Bergen into Engine Holding removes all

related revenue and profit from Energy results

• There is no intersegment trading between Energy

and Bergen

Rolls-Royce’s Full Year 2011 financial results reflected management of the Bergen AS within the Marine and Energy

business segments.

On 2nd January 2012 Bergen transferred to Engine Holding. Rolls-Royce’s 2011 full year and half year business

segment results have been restated to allow comparison with the performance of the business segments as they are

reported in Rolls-Royce’s half-year 2012 results..

Bergen – Business Mechanics

Effect of new Bergen trading set up as part of Engine Holding


Bergen – Results Restatement FY 2011

Underlying Turnover Underlying Profit

FY2011

As reported

Impact of

Restatement

FY2011

Restated

FY2011

As reported

Impact of

Restatement

FY2011

Restated

Civil Aerospace 5,572 5,572 499 499

Defence Aerospace 2,235 2,235 376 376

Marine 2,271 0 2,271 323 (36) 287

Energy 1,199 (116) 1,083 24 (8) 16

Engine Holding 331 331 36 44 80

Intersegment Elimination (215) (215) - - -

Central Costs (52) (52)

Rolls-Royce Holdings 11,277 0 11,277 1,206 0 1,206

Effect of new Bergen trading set up as part of Engine Holding


Bergen – Results Restatement H1 2011

Underlying Turnover Underlying Profit

H1 2011

As reported

Impact of

Restatement

H1 2011

Restated

H1 2011

As reported

Impact of

Restatement

H1 2011

Restated

Civil Aerospace 2,604 2,604 250 250

Defence Aerospace 1,088 1,088 219 219

Marine 1,171 0 1,171 176 (19) 157

Energy 600 (59) 541 (1) (6) (7)

Engine Holding 172 172 0 25 25

Intersegment Elimination (113) (113) - - -

Central Costs (25) (25)

Rolls-Royce Holdings 5,463 0 5,463 619 0 619

5. Additional information Data pack


Simon Goodson Director – Investor Relations

Tel +44(0)207 227 9237

[email protected]

Graeme Barnes Manager – Investor Relations

Tel +44 (0)1332 823821

[email protected]

For more information:

www.rolls-royce.com/investors

Jilinda Crowley Assistant Director – Investor Relations

Tel: +44(0)207 227 9282

[email protected]

Jacinta Francis Programme Coordinator – Investor Relations

Tel +44(0)207 227 9237

[email protected]


Investor Relations

mailto:[email protected]







http://www.rolls-royce.com/investors










Investor Relations - iPad App

Available as a free

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This Results Announcement contains certain forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. In particular, all statements that express forecasts, expectations and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability of financing to the Company, anticipated cost savings or synergies and the completion of the Company's strategic transactions, are forward-looking statements. By their nature, these statements and forecasts involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The forward-looking statements reflect the knowledge and information available at the date of preparation of this Results Announcement, and will not be updated during the year. Nothing in this Results Announcement should be construed as a profit forecast.

65

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