Rolls-Royce Holdings plc · LSE:RR.
Rolls-Royce — H1 2015 Earnings Presentation
30 slides from Rolls-Royce's earnings presentation, Sep 5, 2015
Slide 1: 2015 Half Year Results
2015 Half Year Results Trusted to deliver excellence
Slide 2: Agenda
Agenda 2 • Highlights Warren East • Financial Review David Smith - first half results - guidance - long term prospects • Conclusions Warren East
Slide 3: Highlights
3 Highlights Warren East, Chief Executive Trusted to deliver excellence
Slide 4: Highlights
Highlights 4 • Order book up £2.8bn to £76.5bn, 4% higher • Underlying revenue down 3% to £6.3bn • Underlying profit before tax down 32% to £439m • Free cash outflow of £576m (H1 2014: outflow of £347m) • Payment to shareholders up 3% to 9.27p per share
Slide 5: Financial Review
5 Financial Review David Smith, Chief Financial Officer Trusted to deliver excellence
Slide 6: Group highlights of H1 2015 performance
Group highlights of H1 2015 performance 6 H1 2014 H1 2015 Order book £73.7bn* £76.5bn Revenue £6.5bn £6.3bn Including divested Energy business £6.8bn Profit before tax £646m £439m Including divested Energy business £644m Return on sales 10.5% 7.3% Including divested Energy business 9.9% Free cash fl
Slide 7: Group revenue H1 2015 vs. H1 2014
Group revenue H1 2015 vs. H1 2014 7 Flat, excluding FX £m 97 (95) 6,500 (6) 7 (198) 6,451 6,454 6,256 0 6,000 ~ H1 2014 (excl Energy) Aero OE Aero Services ~ ~ Land & Sea Land & Sea H1 2015 (excl OE Services FX) FX H1 2015 •
Slide 8: Group profit H1 2015 vs. H1 2014
Group profit H1 2015 vs. H1 2014 8 £218m reduction £m 700 (4) (163) 600 ( ) 500 5 (76) 11 20 400 ( ) 300 646 ( ) ( ) (49) 428 439 200 1,620 100 (56) 0 H1 2014 Volume Trading Comm. & Net R&D Restruct. H1 2015 FX H1 2015 (excl margin Admin. (excl FX) Energy)
Slide 9: Group H1 2015 profit vs. free cash flow
Group H1 2015 profit vs. free cash flow 9 £m 317 (747) 800 600 400 439 200 (257) 0 (200) (134) (472) (576) (90) (400) (104) (600) UPBT D&A Net Capital Intangibles Other Trading Pensions Free cash Working Expenditure cash flow and Tax flow Capital
Slide 10: Group free cash flow H1 2015 vs. H1 2014
Group free cash flow H1 2015 vs. H1 2014 10 £m 200 100 0 (100) (200) (347) 39 (207) (576) (300) (400) (500) (187) 140 (96) 82 (600) (700) (800) H1 2014 FCF D&A Cashflow from Net Working Capex and Other Pensions and H1 2015 FCF (excl Energy) Ops (excl NWC) Capital Intangibles Tax
Slide 11: Group financial strength
Group financial strength 11 S&P: A/Stable Credit rating Moody’s: A3/Stable Maintain investment-grade rating Strong liquidity Total liquidity £3.4 billion Spread to 2026 Maturities: Debt maturities 2015 - $83m Private Placement 2016 - £200m bond & €125m EIB loan Foreign exchange and commodity Risk ma
Slide 12: Civil Aerospace
Civil Aerospace 12 £m Revenue H1 Drivers 3,500 18 121 (51) • Order book up 5% 3,000 • Services growth in Trent 2,500 engines 2,000 • Profit reduction from mix 3,197 3,336 3,285 1,500 deterioration and higher 1,000 R&D 500 0 £m H1 2014 OE Services H1 2015 FX H1 2015 £m Profit H2 Drivers 500 31 (124)
Slide 13: Defence Aerospace
Defence Aerospace 13 £m Revenue H1 Drivers (24) 1,000 (24) 38 • Order book down 3% 800 • Modest sales reduction in helicopter and trainer OE 600 • Profit reduction volume 983 935 973 400 driven 200 0 H1 2014 OE Services H1 2015 FX H1 2015 £m Profit H2 Drivers 200 (14) (3) 7 (2) 7 1 • OE order covera
Slide 14: Power Systems
Power Systems 14 Revenue H1 Drivers £m 1,400 • Order book up 12% 1,200 (70) 21 (126) • Reduced demand for naval 1,000 marine products 800 • Reduced profit from 600 1,214 1,165 volume reduction and 1,039 400 adverse business mix 200 0 H1 2014 OE Services H1 2015 FX H1 2015 £m (excl FX) 80 Profit H2 D
Slide 15: Marine
Marine 15 Revenue H1 Drivers £m • Order book down 16% (29) 800 (31) (63) • Oil price weakness 700 impacting offshore 600 500 business 400 818 758 • Lower Naval spares 695 300 • Profit reduction from 200 100 volume and mix 0 H1 2014 OE Services H1 2015 FX H1 2015 £m (excl FX) Profit H2 Drivers (14) 4
Slide 16: Nuclear
Nuclear* 16 Revenue H1 Drivers £m • Order book down 9% 500 (871) • OE revenue growth in 400 (5) instrumental and control 10 15 300 units; aftermarket growth in submarines 200 316 341 336 • Profit increase from higher 100 volumes 0 H1 2014 OE Services H1 2015 (excl FX H1 2015 FX) Profit H2 Drivers £m
Slide 17: 2015 Group guidance
2015 Group guidance 17 Guidance at constant 2014 foreign exchange (excluding Energy) 2014 2015 Guidance Revenue £13.9bn £13.4bn – £14.4bn Profit before tax £1,620m £1,325m – £1,475m Free cash flow £447m £(150)m – £150m Earnings per share 65.4p 55p – 62p Capital expenditure £649m ~£600m (Property, pl
Slide 18: 2015 Segment guidance
2015 Segment guidance 18 Guidance Revenue Profit constant 2014 foreign exchange Aerospace 2014 2015 2014 2015 Civil Aerospace £6,837m £7,000m – £7,300m £942m £800m – £900m Defence Aerospace £2,069m £1,900m – £2,100m £366m £360m – £410m Land & Sea Power Systems £2,720m £2,500m – £2,750m £253m £200m –
Slide 19: Confidence in second half of 2015
Confidence in second half of 2015 19 • Aerospace • Continued service growth • Higher engine deliveries • Lower R&D charge vs H1 • Further TotalCare improvements / Trent 1000 provision reversal • Land and Sea • Power Systems H2 weighted as in previous years • Rebased Marine forecast • Lower Commercia
Slide 20: What's impacting our outlook
What’s impacting our outlook 20 Market developments • Trent 700: volumes and pricing on new orders • Transition from Trent 700 to exclusive Trent 7000 position • Shift from “linked” to “unlinked” OE and aftermarket contracts • Weaker underlying markets • Business jet engines • Softer regional afterm
Slide 21: Implications for 2016
21 Implications for 2016 Key factors vs 2015 profit before tax include: Trent 700 impact of new orders ~ £(250)m Business Jets and Regional Aftermarket ~ £(50)m Improving large engine aftermarket and restructuring Nil offset by likely lower TotalCare and other adjustments Cash conversion expected to
Slide 22: Looking further ahead
Looking further ahead 22 • ~ £76 billion order book • Mega trends underpin profitable growth • Significant embedded value as Civil large engines double and widebody installed base reaches >50% market share • Continuing to strengthen our technology plans • Multi-year industrial transformation program
Slide 23: Market share in installed base lags order backlog
Market share in installed base lags order backlog and 23 underpins confidence in long-term cash flow* Installed base Order backlog 70% 60% Achieved 50% order book 50% 40% 50% 30% 20% Translates into 50% 10% installed base over time 0% 1990 1995 2000 2005 2010 2015 2020 *Market share of widebody pass
Slide 24: Trent XWB creates significant embedded value
Trent XWB creates significant embedded value 24 Total XWB cumulative cash flow around double Trent 700* 2010 2015 2020 2025 2030 2035 2040 2045 2050 2055 *In 2015 £
Slide 25: Projected large engine deliveries to 2024
25 Projected large engine deliveries to 2024 700 100% 90% 600 % link accounted OE deliveries 80% 500 % link accounted OE deliveries 70% Annual Trent deliveries 60% 400 50% 300 40% 200 30% 20% 100 10% - 0% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Slide 26: Land & Sea
26 Land & Sea • Challenging start to the year Marine • Accelerating restructuring programme • Mega trends drive growth Power Systems • World-class people and products • Deep understanding of our customers Nuclear Privileged and confidential - prepared at the request of outside counsel
Slide 27: Conclusions
27 Conclusions Warren East, Chief Executive Trusted to deliver excellence
Slide 28: Conclusions
Conclusions 28 • Delivery • Continue reviewing operations • Restructuring programmes • Market communications • Near-term issues • Confidence in the longer term
Slide 29: Q&A
29 Q&A Warren East, Chief Executive David Smith, Chief Financial Officer Trusted to deliver excellence
Slide 30: Safe harbour statement
Safe harbour statement 30 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 projecti