Rolls-Royce Holdings plc · LSE:RR.
Rolls-Royce — Non-Deal Roadshow (September 2021)
45 slides from Rolls-Royce's roadshow presentation, September 2021
Slide 1: Rolls-Royce Investor Presentation
Rolls-Royce Investor Presentation September 2021 1 Investor Presentation © Rolls-Royce
Slide 2: Our company
1 Our company Investor Presentation 2 Investor Presentation © Rolls-Royce
Slide 3: Delivering on financial priorities and looking towards a lower carbon future
Delivering on financial priorities and looking towards a lower carbon future Restructuring on track and delivering expected results Disposal programme progressing well towards £2bn target Improving cash flow and profitability and on track for 2021 guidance Strong liquidity and targeting net cash med
Slide 4: Underlying revenue by business
Underlying revenue by business Who we are ITP Aero 6% Non-core 2% We are one of the world's leading industrial technology companies. Power Systems Civil Our purpose is to pioneer 22% the power that matters to Aerospace 41% connect, power and protect society. £11.8bn We deliver cleaner, more sustaina
Slide 5: What we do
CIVIL • Major manufacturer of aero engines for the AEROSPACE large commercial aircraft, business aviation £5,089m 4% 11% and regional jet markets Underlying revenue Large engines £(2.6)bn 20% Business • Engineering expertise, in-depth knowledge Regional Underlying 65% What we do and capabilities to
Slide 6: We have a fundamental role to play in meeting the challenge of climate change
© 2021 Rolls-Royce 6 We have a Applying technical pathways to Net Zero Targets fundamental role to decarbonise complex, critical systems play in meeting the Rolls-Royce Products in Service challenge of climate Change in Annual CO 2 Emissions from 2019 to 2050 change 2019 2025 2030 2035 2040 2045 205
Slide 7: Positioning for recovery and creating a sustainable future
2 Positioning for recovery and creating a sustainable future 7 Investor Update onPresentation Rolls-Royce & Proposed Bond Issue © Rolls-Royce
Slide 8: Positioning for the recovery and creating a sustainable future
1 2 3 Positioning for the Restore financial Maximise value from Science-led innovation recovery and performance existing capabilities in sustainable power creating a sustainable future Restore performance, maximise value and focus on sustainable power • Market recovery and low • Civil Aerospace: rea
Slide 9: Progress on restructuring. Driving efficiency
Progress on restructuring. Driving efficiency Our financial performance was severely impacted by the COVID-19 pandemic Restructuring progressing well • Headcount reduction – close to 90% complete – ~8,000 roles now removed, Civil Aerospace reduced by about 30% – Confident in target reduction of at l
Slide 10: Fundamental restructuring
Operating Cost Capital prioritisation Fundamental restructuring • Total role reduction of • Subcontractor spend in • Targeting peer range of We were quick to act, more than 9,000 Civil Aero reduced to 3-4% of sales (2020: 5%) implementing a <1/3 pre-COVID level fundamental restructuring • ~7,000 exi
Slide 11: 2020 cash mitigations
2020 cash Pay & Benefits • 10% pay cut in 2020 for senior management mitigations • Accessed government furlough schemes successfully ~£500m • Restructuring role reductions delivered Capex • Paused non-essential capital spending from April >£1bn 2020 savings • Re-phased and delayed certain capital pr
Slide 12: Focused disposal programme to sell non-strategic assets
Focused disposal programme to sell non-strategic assets Disposals programme progressing well towards target Other assets UK Civil nuclear Bergen Engines instrumentation and controls Announced Announced 4 August 2021 7 December 2020 • Focused disposal programme to sell non-strategic assets • Target t
Slide 13: Maximising value from existing capabilities
Civil Aerospace Defence Power Systems Maximising value from existing capabilities Realising the value of our installed base, growing strategic opportunities and focusing on high-growth • Past investment to build • Over £7bn estimated lifetime • Installed base >150,000 end markets. installed base of
Slide 14: Rolls-Royce was already reaching a pivot point in Civil Aero prior to COVID-19
Rolls-Royce was already reaching a pivot point in Civil Aero prior to COVID-19 Solid Progress in Widebody Widebody Installed Base Civil Aero Transition Civil Aerospace Over the past decade, Rolls-Royce 26% 38% 55% Young Investment in new market share of market order built a leading since 20101 backl
Slide 15: Capitalise on our strong position in Business Aviation
Capitalise on our strong position in Business Realising value in the widebody Aviation installed base Civil Aerospace 2 #1 Continued growth in installed base from a lower base Realising the value with 31% market new flagship engines share1 by value over the last 5 years of our installed base Low EFH
Slide 16: Power Systems & Defence
Power Systems & Defence Continue to be the bedrock of financial performance and cash generation Power Systems Defence With accelerating growth potential from the middle of the decade • Revenue to return to approximately 2019 • Resilient performance through COVID-19 levels by 2022* as GDP-driven shor
Slide 17: Power Systems
Power Systems Power Generation Marine Industrial Other 33% of Sales 34% of Sales 22% of Sales 11% of Sales Varying levels of • Defence markets • Mission critical backup • Government focused • Oil & Gas and mining COVID-19 related power for data centres, customer base with remain subdued, remain robu
Slide 18: Defence demand driven by government defence spending
Demand for defence business’ transport, combat, submarine and naval products is driven by government defence spending Defence DoD (50%) Mo D (25%) Exports (25%) Defence demand US UK ME, Korea, Japan, Canada and India driven by US Defence Spending ($m) UK Defence Spending ($m) government defence 1,00
Slide 19: Looking to the future
Civil Aerospace Defence Power Systems Looking to the future • Lower investment needed • Long-lifespan products • Loyal customer base with as engine programmes supported by through-life regular replacement cycle mature upgrades and aftermarket services • Growing in China with a • Focus on efficiency
Slide 20: Investment priorities
Pivoting towards Accelerating focus on low carbon Power Systems and Defence Self-funded R&D Engineering (inc. R&D) and capital spend Investment 4% 7% 10% priorities 13% 13% 32% 14% 38% 77% Targeting approx. 20% 73% Defence Low carbon 64% annual R&D spend on low carbon solutions including Power Syste
Slide 21: Low carbon technologies
UltraFan: next generation aero engine • Scalable engine architecture offers market optionality Low carbon • 25% more fuel efficient and 100% sustainable aviation fuel compatible technologies • Incorporates ALECSys Lean Burn Combustor • Progressing to final assembly in 2021 Improving engine efficienc
Slide 22: Enabling net zero
Hydrogen • Member of European Clean Hydrogen Alliance • Exploring the fundamentals of H2 in aviation • Partnership with Daimler Truck / Volvo on stationary H2-powered Enabling net zero fuel-cell generators in finalisation • MTU Series 500 engine for power generation to be available for operation wit
Slide 23: Enabling net zero: electric aviation
Urban Air Mobility • First commercial contract for electric propulsion units to power an eVTOL vehicle (with Vertical Aerospace) • Vertical Aerospace announced intention to list; >$4bn pre-orders for Enabling net >1,000 aircraft zero: electric • CityAirbus eVTOL demonstrator flight test programme av
Slide 24: Financial priorities
3 Financial priorities 24 Investor Update onPresentation Rolls-Royce & Proposed Bond Issue © Rolls-Royce
Slide 25: Financial progress and priorities
Improving cash flow generation • 2021 FCF expected to turn positive during the second half 2021 and targeting Financial progress around £(2)bn for the full year and priorities • Our self-help actions are generating savings and efficiency gains: on track to deliver at least £1bn in 2021 and targeting
Slide 26: Strong liquidity and improving financial performance
H1 2021 Strong liquidity and improving financial performance Our financial performance was severely impacted by the COVID-19 pandemic Group underlying results Underlying Revenue (continuing business) 2021 H1 Results summary 3% • Solid start to the year with improving cash flow and profits, as expect
Slide 27: £1.7bn improvement in free cash outflow
Non-repeat of c.£1.2bn HY 2020 non- cash charges increases EBITDA, offset in LTSA / provisions Working capital EBITDA +£1,203m £(215)m Growth £1.7bn improvement +£1,941m FX hedges £(90)m £(188)m £(1,174)m in free cash outflow Interest & Pensions £(1)m facility fees Tax & PPE & other 2021 H1 £(896)m
Slide 28: Rebuilding the balance sheet
Rebuilding the Net debt progression (pre-leases) Illustrative, not to scale balance sheet >£2bn Net cash medium-term £(3.1)bn Improving free cashflow Organic cash 2021 H1 ~£(0.8)bn £2bn generation Disposals progressing well Net Debt ~£(4)bn 2022+ 2021 H2 FCF ~£(0.2)bn 2021 H2 Exceptional 2021 Dispos
Slide 29: 2021 guidance summary
2020 2021 Civil Aerospace Drivers Large engine deliveries 264 200-250 2021 guidance Large engine LTSA EFH 6.6m Gradual recovery Significant near term uncertainty over Civil Aerospace outlook summary Large engine LTSA major refurbs 272 ~250 Group guidance includes Defence ITP Aero Revenue £3,366m Sta
Slide 30: Appendix
4 Appendix 30 Investor Update onPresentation Rolls-Royce & Proposed Bond Issue © Rolls-Royce
Slide 31: Transition to net zero
We have pledged to achieve net zero carbon in our operations by 2030 Our financial performance was severely impacted by the COVID-19 pandemic and play a crucial role in enabling the sectors in which we operate reach Transition to net zero net zero by 2050 Net zero targets • By 2023, all in-productio
Slide 32: Understanding COVID-19 impact on Civil Aero drivers
Widebody OE WB AM Businesses, Regional Cash Margin & V2500 • 264 total installed & spare • Material reduction in WB EFH • Business jet invoiced EFH Understanding deliveries (2019: 510) receipts (57% lower EFH) receipts resilient COVID-19 impact • £1.1m avg. installed loss (2019: • Significant reduct
Slide 33: Drivers of Civil LTSA balance change
Invoiced EFH receipts P&L revenue Reflects invoiced EFH receipts on long-term Driven by cost (e.g. shop visits) across large contracts across entire Civil LTSA-covered fleet engine, business aviation and regional fleets. LTSA balance H1 21: Recognised by contract, as costs incurred, at Drivers of Ci
Slide 34: Non-operational cash charges
Non-operational Trent 1000 in-service cash cost schedule: cash charges Costs are included in Group FCF definition 2017-19: £1,023m 2020 £524m 2021 £300m-£400m (H1: ~£170m) Provisions provided for over half of future 2022 £100m-£200m costs, remainder will be traded through 2023+ ~£200m underlying P&L
Slide 35: Trent engine products
Trent engine products Market Engines in Engines on £m Airframe share* service order Trent 7000 Airbus A330neo 100% 94 516 Leading widebody market share Trent XWB Airbus A350 100% 714 919 Trent 1000 Boeing 787 33% 566 127 Trent 900 Airbus A380 48% 92 2 Trent 800 Boeing 777 40% 160 0 Trent 700 Airbus
Slide 36: Civil engine deliveries
Civil engine By engine 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 H1 2021 deliveries RB211 22B RB211 524 0 2 0 5 0 7 0 0 0 5 0 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 RB211 535 14 6 0 2 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 RB211 Total 16 11 7 2 5
Slide 37: Civil engine in-service installed fleet
Civil engine By engine 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 H1 in-service RB211 22B RB211 524 48 829 36 815 36 796 12 791 15 769 706 9 12 643 638 9 6 617 530 6 455 3 3 352 302 3 278 3 266 3 3 242 3 210 3 82 3 80 installed fleet** RB211 535 1,
Slide 38: Civil in-service thrust base
Civil in-service Thrust 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 H1 thrust base By engine per engine (lbs) (millions lbs)** RB211 22B RB211 524 60,000 60,000 50 3 49 2 2 48 1 47 46 1 1 42 1 39 38 1 0 37 0 32 0 27 0 21 0 18 0 17 0 16 0 15 0 13 0 5
Slide 39: Foreign exchange
Foreign Rolls-Royce hedges Rolls-Royce does not hedge against exchange transactional FX the impact of translational FX • Transactional exposure arises when revenue • Translational exposure varies by source of currencies differ from cost currencies revenues and profits • Achieved rate is not typicall
Slide 40: Pensions HY21
UK Defined Benefit (DB) Plan Overseas plans Pensions HY21 • UK DB Plan closed to future accrual on 31 December • 22% of gross liabilities and 9% 2020 (it was closed to new hires in 2007). Just over of gross assets. 7,000 employed members onboarded to our UK Defined Contribution (DC) Plan on 1 Januar
Slide 41: Civil Aerospace key drivers
Original equipment Installed engines Sale to airframer Civil Aerospace Aircraft key drivers deliveries Sale to operator / lessor Spare engines or Lease to operator into se rvi ce Ai rcraft go TotalCare $ per engine flying hour Aftermarket Aircraft in Service Time & material $ per event (e.g. shop vi
Slide 42: Civil Aerospace investment cycle
In-service Civil Aerospace Cash investment cycle generati on Long investment cycles supported by: Access to government R&D funding for technology development OE Build and Delivery Risk and revenue sharing C a s h consumpt i on partnerships for programme investment Supply chain and services joint ven
Slide 43: Aftermarket (LTSA) cash profit dynamics
Illustrative and simple worked example on 1 engine $m Year 1 Year 2 Year 3 Year 4 Year 5 Total Aftermarket (LTSA) Engine Flight Hours 20 20 20 20 20 cash profit dynamics Cash x $ per EFH 5 5 5 5 5 Flow EFH Receipts 100 100 100 100 100 500 Statement Change in LTSA balance - Major Service Costs - - -
Slide 44: Safe harbour statement
Safe harbour This announcement contains certain forward-looking statements. These forward- looking statements can be identified by the fact that they do not relate only to statement historical or current facts. In particular, all statements that express forecasts, expectations and projections with r
Slide 45: Contacts
Contacts Isabel Green Head of Investor Relations isabel.green@rolls-royce.com Elena Prentice Investor Relations & ESG Manager elena.prentice@rolls-royce.com Sophie Parry Investor Relations Manager Sophie.parry@rolls-royce.com 45 Investor Presentation © Rolls-Royce
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