Rolls-Royce Holdings plc · LSE:RR.
Rolls-Royce — FY2008 Earnings Presentation
51 slides from Rolls-Royce's earnings presentation, Feb 12, 2009
Slide 1: 2008 Preliminary results
2008 Preliminary results Sir John Rose Mike Terrett Andrew Shilston 1
Slide 2: Financial highlights - 2008
Financial highlights - 2008 z Order book − Firm and announced order book up 21% to £55.5bn z Revenue − Revenues £9.1bn - 17% underlying growth − Services revenues £4.8bn - 11% underlying growth z Profit − Underlying PBT £880m - 10% growth − Underlying EPS 36.70p - 8% growth z Strong financial positi
Slide 3: A strong power systems company
A strong power systems company z Broad geographical product and service portfolio in growing markets z Robust balance sheet z Early action on cost in 2008, continuing in 2009 z Customer knowledge, technology and systems integration create opportunities z 2009 Guidance: − Underlying revenues to grow
Slide 4: Financial performance
Financial performance Andrew Shilston Underlying profit is a non-IFRS measure. Definitions and reconciliations of underlying profits and additional disclosures and provided in the Group’s press release dated 12 February 2009 4
Slide 5: Foreign exchange
Foreign exchange z GBP devalued in 2008 − USD strengthened to £~$1.44 (H108 ~ 1.99, FY07 ~ 1.99) − Euro strengthened to £~$1.03 (H108 ~ 1.26, FY07 ~ 1.36) z Long term hedging strategy continued – capitalising on improving rates − Circa $40bn exposure over 10 yrs − Dec 2008 $ book increased to $17.1b
Slide 6: Components of underlying profit growth
Components of underlying profit growth 6
Slide 7: Civil – Well-balanced portfolio
Civil – Well-balanced portfolio 2008 Revenues ~ £4.5bn •Market leader – Large Corporate and • Growing despite delayed major new Widebody programmes •Large and increasing installed thrust • Increasing penetration of TotalCare •Young, fuel efficient fleet and CorporateCare 7
Slide 8: Civil Aerospace
Civil Aerospace Revenues * Profit * Order Book** 2008 2007 2008 2007 2008 2007 £m £m £m £m £bn £bn 4,502 4,038 566 564 43.5 35.9 z Continued strong order flow in 2008 z Strongest engine deliveries since 2001 − Installed thrust up 4% in yr, services revenues up 7% z Minimal exposure to parked A/C in
Slide 9: Defence – A broad portfolio
Defence – A broad portfolio 2008 Revenues ~ £1.7bn •Broadly based portfolio •Well positioned on global programmes •>18,000 engines in service •Combat, Transport, Helicopters, UAV’s, Trainers 9
Slide 10: Defence Aerospace
Defence Aerospace Revenues * Profit * Order Book** 2008 2007 2008 2007 2008 2007 £m £m £m £m £bn £bn 1,686 1,673 223 199 5.5 4.4 z Strong positions on major programmes~growing order book z TP400 – Challenging but good progress on FTB, maturity testing z Net-one off charges of £20m in 2007 not repeat
Slide 11: Marine – Continuing strong growth
Marine – Continuing strong growth 2008 Revenues ~ £2.2bn • Integrated propulsion solutions •Leading position in Offshore • Product on 30,000 vessels •Services growing quickly – • Improving position in Naval major opportunity 11
Slide 12: Marine
Marine Revenues * Profit * Order Book** 2008 2007 2008 2007 2008 2007 £m £m £m £m £bn £bn 2,204 1,548 183 113 5.2 4.7 z Increasingly broad portfolio addressing specialist vessels − Continued strong growth in Offshore − Extending capability through the acquisition of SEH z Revenues up 42% driven by O
Slide 13: Energy – Investing for future growth
Energy – Investing for future growth 2008 Revenues ~ £0.8bn •Strong, well-positioned Oil & Gas •Growing importance of long term services support •Evolving Power generation •Low carbon ~ fuel cells, tidal, nuclear 13
Slide 14: Energy
Energy Revenues * Profit * Order Book** 2008 2007 2008 2007 2008 2007 £m £m £m £m £bn £bn 755 558 (2) 5 1.3 0.9 z Strong Oil & Gas, Power Generation making good progress z Record year for Industrial Trent z Fuel Cells – focus on technology with reducing investment z Established Civil Nuclear busines
Slide 15: Underlying financing costs
Underlying financing costs 2008 2007 £m £m Interest (10) (6) Financial RRSPs (26) (26) Other (3) - Underlying financing costs (39) (32) 15
Slide 16: Components of cash flow – 2008
Components of cash flow – 2008 16
Slide 17: Pension risks substantially reduced
Pension risks substantially reduced z Early action taken to address deficit and future volatility − UK defined benefit schemes closed to new members − £500m special injection and asset allocation 80% in bonds z UK schemes - Significant IAS 19 pension surplus ~ £1.4bn − IAS19 Valuation driven by AA d
Slide 18: Strong balance sheet
Strong balance sheet z Strong cash position − £358m cash inflow before M&A, revaluation, Defence deposits flow down − £1.5bn net cash at year end, average net cash £375m − Debt maturities well spread – 2010 to 2016 − £650m available from undrawn facilities – mainly EIB − Customer and supplier financ
Slide 19: Summary
Summary z Strong performance in 2008 z Robust financial position and credit rating z Flexibility to respond to investment opportunities z Reduced volatility in UK pension schemes z Increased payment to shareholders 19
Slide 20: Operational performance
Operational performance Mike Terrett 20
Slide 21: Significant progress in 2008
Significant progress in 2008 z Improvement in support functions − 2,300 headcount reduction in 2008 – self-funding in the year (£100m benefit in 2009) z Continued focus on cost/productivity/matching load and capacity − 1,500 to 2,000 announced for 2009 – self funding in 2009 − Adding resource ~ Mari
Slide 22: Delivering operational improvements
Delivering operational improvements Revenue per employee z Investing in focused factories – 50% less space; 30% more output z Revenue/employee up 8% compound since 1998 z More flexible and capable supply chain z Early action on cost Expanding and improving operational capability 22
Slide 23: Managing in a volatile environment
Managing in a volatile environment z Planning and investing for long term organic growth − Managing short term uncertainty − Significant new product introduction z World-class planning capability introduced z Increasingly flexible supply chain z Phasing investment to match load growth Investing for
Slide 24: Operations summary
Operations summary z Progress to restructure supply chain z Managing significant load volatility z Acted early to right-size functions and manage changing load z Investing for significant long term growth Planning long term growth – managing short term challenges 24
Slide 25: Summary
[3] Rolls-Royce Summary Sir John Rose 25
Slide 26: 2009 Guidance
2009 Guidance z Revenue − Continued revenue growth z Profitability − Civil ~ profits down year on year − Marine and Defence ~ continuing revenue and profit growth − Energy ~ modest profit − Continuing focus on cost and efficiency − FX ~ no deterioration in achieved rate year on year − Unit costs inc
Slide 27: A resilient business
A resilient business z Strong performance in 2008 z Well-balanced product, revenue and geographical portfolio z Continued focus on productivity, cost and discretionary spend z Strong balance sheet provides flexibility to grow Well positioned for long term growth 27
Slide 28: Safe Harbour Statement
Safe Harbour Statement This Annual 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 proj
Slide 29: Appendices to the 2008 Preliminary Results
APPENDICES TO THE 2008 PRELIMINARY RESULTS 29
Slide 30: A consistent strategy
A consistent strategy 001314 30
Slide 31: Managing challenges
Managing challenges 9/11 SARS Commodity inflation Major new Gulf War Weakening USD programmes delayed 31
Slide 32: A Global leader in Power Systems
A Global leader in Power Systems z A robust Power Systems integration business z Global access, few competitors and high barriers to entry z Technology rich, with strong understanding of customers’ requirements Capability and technology - significant barriers to entry 32
Slide 33: A broadly based and well balanced business
A broadly based and well balanced business Revenues Better able to withstand current economic uncertainties 33
Slide 34: Understanding the customer
Understanding the customer z Close understanding of the customer’s needs z Provides integrated solutions z Creating value for the customer Long term customer relationships 34
Slide 35: Improved productivity and cost reduction
Improved productivity and cost reduction • Investing for long term growth • Revenue per employee up 18% in 2008 Revenue per employee • Developing internal and external supply chain • Improving functional performance £100m cost savings in 2009 Revenues stated on a constant currency basis 35
Slide 36: Revenue per employee
Revenue per employee Revenues stated on a constant currency basis 36
Slide 37: Broadening our portfolio
Broadening our portfolio atts Merge (ren st eo i oa Tay 611C | Trent 1000 BRIS — BRIO Bergen Diesels aro MT30 Trent XW Trent soo Trent 900 5| ay AE NORE #RBOO iR| Rolls-Royce industrial = F135 for BF Rolls-Royce ts privatised Trent 800 AE 2100 a 37
Slide 38: Balanced business portfolio – 2008 £9.1bn
Balanced business portfolio – 2008 £9.1bn 38
Slide 39: Long term visibility
Long term visibility Order book* ~ £55.5bn *Order book stated on a constant currency basis 39
Slide 40: Debt maturities
Debt maturities - Gross facilities of £1.0bn outstanding 40
Slide 41: Research & Development
Research & Development 2008 2007 £m £m Gross spend (885) (824) Funded externally 395 370 Net R&D spend* (490) (454) * Net R&D spend % Sales 5.4% 5.8% Capitalised 113 91 Amortised (26) (18) R&D Charged to Income Statement (403) (381) 41
Slide 42: Detailed Cash flow
Detailed Cash flow 2008 2007 £m £m Trading cash generation 1,170 985 Special pensions injection - (500) Tax payments (117) (71) Defence programme deposits (76) 76 Other working capital 38 215 Cash flow from operating activities 1,015 705 Payments to shareholders (200) (97) Investment in businesses/J
Slide 43: Adjusted cash flow
Adjusted cash flow 2008 2007 £m £m Reported Cash flow 570 62 Special pensions injection - 500 Defence programme deposits 76 (76) FX - Retranslation (439) (41) Net investment in businesses 151 19 Adjusted Cash flow 358 464 43
Slide 44: Pensions – volatility closed down
Pensions – volatility closed down 2008 2007 £m £m UK assets 7,163 6,626 UK liabilities (5,719) (6,335) Net surplus 1,444 291 Unrecognised surplus (1,036) (110) Net UK surplus 408 181 Overseas (550) (304) Net IAS 19 deficit (142) (123) Memo: - Finance Costs (22) 30 44
Slide 45: Engine Deliveries
Engine Deliveries Engine deliveries 2000 2001 2002 2003 2004 2005 2006 2007 2008 Trent & RB211 181 230 151 169 171 170 203 145 193 V2500 216 285 224 216 237 327 319 308 351 Small Engines 694 847 481 361 416 384 334 398 443 Civil total 1,091 1,362 856 746 824 881 856 851 987 AE Common Core & BR700 91
Slide 46: Civil Aerospace portfolio
Civil Aerospace portfolio 46
Slide 47: Civil Aerospace - Installed thrust
Civil Aerospace - Installed thrust* •Dec 2008: •Dec 2001: •12,874 engines in service •9,212 engines in service 348m lbs thrust 241m lbs thrust 87% < 20 years old 86% < 20 years old *Including 50% of V2500 47
Slide 48: Increase in parked aircraft
Increase in parked aircraft February 2008 to February 2009 Aircraft: Announced Net Parked* Total 1,134 699 Rolls-Royce 205 130 Thrust: Announced Net Parked (Millions lbs) Total 57 37 Rolls-Royce 8.7 6.1 * “Net parked” represents aircraft parked in the last 12 months less aircraft previously parked n
Slide 49: Defence Aerospace portfolio
Defence Aerospace portfolio 49
Slide 50: Marine portfolio
Marine portfolio Ship design ang Prime movers Propulsors Motion control Support ship systems ae \ 5 4 ab Power syuterns Gas tartans Waterpets thrusters, Steering gear Compreberares contrts aed 310 SOMW Contrediabie patch subasers cuntomer support nutumentunce Dieets sod aed pinch 5 ms 10M propetiens
Slide 51: Energy portfolio
Energy portfolio Sp ss Reciprocating engine 501 / Avon RB211 Trent 60 2-65MWw S14Mw 32MW SaMw 5-58MW aero-derived gas turbine energy solution 'R| Rolls-Royce 51