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
3 Trusted to deliver excellence
Trusted to deliver excellence 4
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%)
Trusted to deliver excellence 5
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
Trusted to deliver excellence 6
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
Trusted to deliver excellence 7
Substantial order book*
Trusted to deliver excellence 8
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
Trusted to deliver excellence 9
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%
Trusted to deliver excellence 10
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
Trusted to deliver excellence 11
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
Trusted to deliver excellence 12
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
13 Trusted to deliver excellence
Trusted to deliver excellence 14
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
Trusted to deliver excellence 15
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
Trusted to deliver excellence 16
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
Trusted to deliver excellence 17
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
Trusted to deliver excellence 18
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
Trusted to deliver excellence 19
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
Trusted to deliver excellence 20
Group cash flow
Trusted to deliver excellence 21
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
Trusted to deliver excellence 22
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%
Trusted to deliver excellence 23
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
Trusted to deliver excellence 24
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
Trusted to deliver excellence 25
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
26 Trusted to deliver excellence
3. Key performance indicators Data pack
27 Trusted to deliver excellence
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.
Trusted to deliver excellence 28
Group KPIs
4a. Details by business sector – Civil Data pack
29 Trusted to deliver excellence
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
Trusted to deliver excellence 30
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
Trusted to deliver excellence 31
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
Trusted to deliver excellence 32
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
Trusted to deliver excellence 33
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
Trusted to deliver excellence 34
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
Trusted to deliver excellence 35
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
Trusted to deliver excellence 36
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
Trusted to deliver excellence 37
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
Trusted to deliver excellence 38
Civil installed thrust Millions of pounds (m/lbs) of installed thrust* in service
Trusted to deliver excellence 39
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
40 Trusted to deliver excellence
Services 51% Development
5%
OE 44%
Transport 59%
Combat 33%
UAV/Trainer 8%
Trusted to deliver excellence 41
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
>1,200 engines in service
Adour BAE Hawk T-45 Goshawk
FJ44 Saab SK60
Transport
>9,000 engines in service
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
>5,000 engines in service
MTR390 Eurocopter Tiger
RTM322 Blackhawk Apache NHI NH90
CTS800 Super Lynx 300
Gem Lynx
Gnome Augusta Westland Sea King
Trusted to deliver excellence 42
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
Trusted to deliver excellence 43
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
Trusted to deliver excellence 44
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
Trusted to deliver excellence 45
Defence engine deliveries
4c. Details by business sector – Marine Data pack
46 Trusted to deliver excellence
OE 58%
Services 42%
Trusted to deliver excellence 47
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
Trusted to deliver excellence 48
Marine – Business overview
Trusted to deliver excellence 49
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
Trusted to deliver excellence 50
Unique capabilities for Offshore Rolls-Royce designs and integrates complex systems
4d. Details by business sector – Energy Data pack
51 Trusted to deliver excellence
Oil & Gas 56%
Power Generation
34%
Civil Nuclear 11% Services
60%
OE 40%
Trusted to deliver excellence 52
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
Market Sector Description Products
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
Trusted to deliver excellence 53
Energy – Business overview
Market Sector Description Products
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
Trusted to deliver excellence 54
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
Trusted to deliver excellence 55
Energy – Civil Nuclear
4d. Details by business sector – Engine Holding
56 Trusted to deliver excellence
57
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
Trusted to deliver excellence 57
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
Trusted to deliver excellence 58
Tognum joint venture
Bergen diesel engine business transfers into Engine Holding
Trusted to deliver excellence 59
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
Trusted to deliver excellence 60
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
Trusted to deliver excellence 61
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
62 Trusted to deliver excellence
Simon Goodson Director – Investor Relations
Tel +44(0)207 227 9237
Graeme Barnes Manager – Investor Relations
Tel +44 (0)1332 823821
For more information:
www.rolls-royce.com/investors
Jilinda Crowley Assistant Director – Investor Relations
Tel: +44(0)207 227 9282
Jacinta Francis Programme Coordinator – Investor Relations
Tel +44(0)207 227 9237
Trusted to deliver excellence 63
Investor Relations
Trusted to deliver excellence 64
Investor Relations - iPad App
Available as a free
download on iTunes
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
Safe harbour statement
Trusted to deliver excellence