Rolls-Royce Holdings plc · LSE:RR.
Rolls-Royce — Investor Day (June 2022)
47 slides from Rolls-Royce's investor day presentation, June 2022
Slide 1: Appendix 1: Finance tour
Appendix Appendix 1 Finance tour Modelling help and Q&A discussion 1 2022 Civil Aerospace © Rolls-Royce
Slide 2: Introduction
Arvind Balan Andy Banks Peter Lapthorn Introduction A subset of our finance team CFO Civil Aerospace Head of Civil FP&A Head of Group Analysis since 2022 since 2018 & Insight since 2021 14 years at Royal Dutch Over 20 years at Rolls- Previously worked as Shell, including most Royce, including Head o
Slide 3: Guidance summary
Guidance summary 2019 2021 Medium term Guidance DRIVERS summary Engine deliveries (large & business engines) 729 309 Mid teens CAGR Shop visit volumes (large, business & regional engines) 1,554 953 Low double-digit CAGR LTSA engine flying hours (large, business & regional engines) 19.4m 10.3m Approa
Slide 4: Operational & financial model
Drivers OE deliveries Shop visit volumes Engine flying hours Operational & # of deliveries # of shop visits # of flying hours & pricing & scope of overhauls & average hourly rate financial model Revenue OE revenue AM revenue Change in Invoiced EFH receipts (LTSA & T&M) LTSA balance Our operational d
Slide 5: Understanding the LTSA balance
Cash flows P&L Difference between invoiced EFH receipts 3 Understanding 1 & revenue recognised ∆ LTSA balance Net LTSA the LTSA balance cash flow LTSA Invoiced EFH profit receipts LTSA revenue The LTSA balance is the LTSA 2 P&L revenue is driven LTSA connection between profit and costs by LTSA costs
Slide 6: Cash conversion
Operating • Revenue growth at low double-digit CAGR profit • High single-digit operating margins Cash conversion Net LTSA • Average of ~£500m pa medium term balance change Materially improved, higher quality cash generation versus • Very low level of R&D capitalisation due to product maturity pre-CO
Slide 7: LTSA example
$m Year 1 Year 2 Year 3 Year 4 Year 5 Total Engine flying hours 100 100 100 100 100 500 $ per EFH 10 10 10 10 10 10 LTSA example Cash Invoiced EFH receipts 1,000 1,000 1,000 1,000 1,000 5,000 flow Shop visit costs -2,000 -2,000 Other ongoing costs -100 -100 -100 -100 -100 -500 Total costs -100 -100
Slide 8: LTSA example: Catch-up in year 4
$m Year 1 Year 2 Year 3 Year 4 Year 5 Total Engine flying hours 100 100 100 100 100 500 $ per EFH 10 10 10 10 10 10 LTSA example Cash Invoiced EFH receipts 1,000 1,000 1,000 1,000 1,000 5,000 Catch-up in year 4 flow Shop visit costs -1,500 -1,500 Other ongoing costs -100 -100 -100 -100 -100 -500 Tot
Slide 9: Appendix 2: Efficiency and Productivity Case Studies
Appendix Appendix 2 Efficiency and Productivity Case Studies 9 2022 Civil Aerospace © Rolls-Royce
Slide 10: Key drivers of value
Key drivers of value Creating value from a growing and maturing fleet as the market for international passenger travel recovers MAXIMISE BUSINESS SERVICES COST OE MARGIN INVESTMENT Retaining the operational SERVICES AVIATION efficiency and productivity REDUCTION IMPROVEMENT REDUCTION RECEIPTS GROWTH
Slide 11: Case Study: Horizontal overhaul method
Case Study 15% Labour hours saving per shop © Dassault visit Horizontal overhaul method • Disassemble and re-assemble the engine in a horizontal orientation rather than vertical • This enables a more targeted workscope to be achieved helping to prevent creep • On average we forecast a reduction in l
Slide 12: Case Study: Trent XWB-97 front cover plate re-use
Case Study £100k+ Saving per shop visit © Dassault Trent XWB-97 front cover plate re-use • Established increased acceptance limits to address wear mechanisms that were causing front cover plates to be scrapped • Minimising component level interventions is the most economic and sustainable way of red
Slide 13: Case Study: Nozzle guide vanes repair
Case Study 40% Typical cost saving vs. fit new © Dassault Intermediate pressure nozzle guide vanes repair • We have introduced a suite of repairs of this component to avoid replacement with new • The repairs are largely common with other Trent engine variants • Complex repairs on high volume compone
Slide 14: Case Study: Seal segment laser deposition repair
Case Study 30% Cost saving compared to new © Dassault Seal segment Direct Laser Deposition repair • Innovative additive layer manufacturing method called Direct Laser Deposition to build up a matrix structure and re-create the sealing face • Enables repair of seal segments which would otherwise have
Slide 15: Case Study: Turbine blade life
Case Study x2 Turbine blade life © Dassault 543 Trent TEN & Trent 1000 TEN & 7000 High Pressure Turbine Blade Trent 7000 • Incorporating latest technology engines in service • Using simulation of fleet operations to inform design • Component life increase to support overall engine time to refurbishm
Slide 16: Case Study: Life limited parts extension
Case Study >20% Life limited parts extension © Dassault 543 Trent 1000 TEN & 7000 Life Limited Parts extensions Trent TEN & • Improvement of our life limited parts >20% Trent 7000 engines in service • Use of actual versus generic operational data to provide further life improvement >50% • Parts life
Slide 17: Case Study: Temperature limits
Case Study +8% Temperature limits © Dassault 543 Trent TEN & Trent 1000 TEN & 7000 enhanced temperature limits Trent 7000 • Engine testing to certify additional temperature limit engines in service • Engine monitoring used to optimise maintenance • Reduces temperature & engine deterioration to suppo
Slide 18: Case Study: Time on wing
Case Study +10% Time on wing © Dassault 543 Trent TEN & Trent 1000 TEN & 7000 better aircraft operations Trent 7000 • Optimising climb leading to 40% component wear reduction engines in service • Next generation of engine washing (JetVac) improving time on wing by 10% • Improves engine wear & deteri
Slide 19: Turbine Viper Grinding Case Study
Turbine Viper Grinding Case Study 100% Capacity & New Turbine Blade Automated VIPER Grinding Cell Productivity • De-commissioned 20 year old equipment and installed automated machining cell with scheduling software and other technology improvements Improvement in • Footprint reduction resulting in i
Slide 20: Trent XWB-84 Engine lead time
Trent XWB-84 Engine lead time >40 days to 27 days reduction in engine lead-time Trent XWB-84 engine lead time reduction • We have removed waste & non-essential work from the critical path of the engine £3.4m • We have crossed trained our fitters Engine inventory • Working with our logistics teams, w
Slide 21: Trent 1000 HP Turbine Disc lead time
Trent 1000 HP Turbine Disc lead time © Dassault 33% reduction in lead time, 12 week to Trent 1000 HP Turbine Disc 8 week • We implemented a pull system at the bottleneck operation of broaching, optimising batch sizes to minimise set up time loss and create better flow £1.3m • We consolidated our ins
Slide 22: Turbine blade wax assembly lead time
Turbine blade wax assembly lead time © Dassault Lead time reduction from 7 days to 2 days Wax Assembly Lead Time Reduction 750 part inventory • We have interactive value stream mapping with live data from all operators on each process showing saving - £0.3M variations on actual times versus standard
Slide 23: Electronics Cell productivity improvement
Electronics Cell productivity improvement © Dassault 80% productivity improvement - Electronics Cell Lean Transformation £600k • We have increased machine reliability of the production line • We have improved the performance of the automated inspection equipment £200k • We have improved product flow
Slide 24: Fan Blade Singapore lead time
Fan Blade Singapore lead time © Dassault 52 days to 41 day reduction in fan Fan Blade Lead Time Reduction blade lead time • We aligned our Vision across all manufacturing cells to deliver lead time reduction • We have delivered waste reduction across the manufacturing Value Stream • We improved mach
Slide 25: Appendix 3: Civil Aerospace Facts & Figures
Appendix Appendix 3 Civil Aerospace Facts & Figures 25 2022 Civil Aerospace © Rolls-Royce
Slide 26: At Rolls-Royce, we believe in the positive
Our company At Rolls-Royce, Rolls-Royce pioneers we believe in the cutting-edge technologies that deliver clean, safe and positive, competitive solutions to meet our planet’s vital transforming power needs. Our purpose is to pioneer the power that potential matters to connect, power and protect soci
Slide 27: Our business
Civil Power Systems Defence Electrical SMR Our business groups 35 40,000 160 NEW MARKET NEW MARKET types of commercial customers in 11 customers in over aircraft powered by us different industries 103 countries 15,400 20,000 16,000 £52m £16m installed base around reciprocating engines engines in ser
Slide 28: Pioneering sustainable power for civil aerospace
Pioneering sustainable power for civil aerospace Civil Aerospace 28 © 2022 Rolls-Royce | Not Subject to Export Control
Slide 29: Civil Aerospace £4,536m underlying revenue
35 types of commercial aircraft powered by us 15,400 Civil installed base around the world Aerospace 17,900 employees £4,536m underlying revenue V2500 3% Regional 4% Business aviation 21% Underlying revenue mix Large engine 72% 29 © 2022 Rolls-Royce
Slide 30: Civil Aerospace £4,536m revenue, £172m operating loss
Civil Aerospace £4,536m Underlying revenue 1 £172m Our Civil Aerospace business is a major manufacturer of aero engines for the large 1 commercial aircraft, Underlying operating loss regional jet and business aviation markets. The business uses its engineering expertise, V2500 3% Regional 4% in-dept
Slide 31: Leaders in Airlines
Leaders in Airlines Civil Aerospace ~3,400 Customers ~9,100 Aircraft in airline service* 450m+ Engine Flying Hours *combined in-service and storage Includes all RB211, Trent, Regional and Business Aviation engines Civil Aerospace 31 © 2022 Rolls-Royce | Not Subject to Export Control
Slide 32: Leading products in Core Markets
Leading products in Core Markets Business Aviation Portfolio In Service In Production In Flight-test & Development © Bombardier © Gulfstream © Gulfstream BR710 | Bombardier Global Express, 5000 & 6000 Gulfstream V, G500 & G550 BR725 | Gulfstream G650 Pearl 10X | Dassault Falcon X Tay | Gulfstream IV
Slide 33: Customer, Design, Manufacture, Service, Transition
Customer Design Manufacture Service Transition 3000+ ~4000 33 13 . customers across . design engineers . manufacturing large engine . Trent . 700 continuously Powers more A330 the globe pioneering facilities maintenance, repair transitions that competitors and overhaul bases* 15,400 40% ~25% 130 A33
Slide 34: Our Global Service Network
Derby, United Kingdom (Civil large engine headquarters) Dahlewitz, Germany (Business Aviation Headquarters) Our Global Service Network Our global network allows people, parts, tools and engines to move quickly and admin free around the world to cater to customer needs 1 Rolls-Royce maintenance facil
Slide 35: Strategic procurement and supply chain
RAW MATERIAL COMPLEX FINISHED MACHINING COMPONENTS DESIGN MAKE & FORMING Strategic procurement is aligned to four categories of spend 50 suppliers 150 suppliers 300 suppliers 100 suppliers £0.7bn £0.5 bn £0.5bn £0.5bn PCC Hanwha AECC Parker-Hannifin ATI Senior Group ITP Collins Howmet Forgital Group
Slide 36: Our Leadership Team
< OUR LEADERSHIP TEAM President – Civil Aerospace Chris Cholerton Business Aviation Services ServicesDirector Chief Customer Director Director Officer Dirk Dominic Ewen Geisinger Horwood McDonald Director – Product Development Services Director and Technology Operations Director Sebastian Simon Resc
Slide 37: 2021 Full Year Results: Civil Aerospace Supplementary Data
2021 Full Year Results Civil Aerospace Supplementary Data 37 2021 Full Year Results © Rolls-Royce
Slide 38: Civil Aerospace: Driving growth from established businesses
Civil Aerospace © Dassault • Improved operational gearing with restructured cost base • Significant value in installed base of around 5,700 large and 9,700 regional and business aviation engines • Airbus A350 freighter is a great opportunity for Trent XWB with 58 additional engine orders since its l
Slide 39: Civil Aerospace underlying results
Civil Aerospace Underlying results Organic Reduction in engine £m FY 2021 FY 20201 Change % deliveries partly offset by improvement in Revenue 4,536 5,068 (491) (10)% LTSA catch up Gross profit / (loss) 474 (1,987) 2,477 Restructured business with smaller footprint Large engine KPIs Gross margin % 1
Slide 40: LTSA balance
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: Recognised by contract, as costs incurred, at Drivers of Civil LT
Slide 41: Civil Aerospace revenues by engine type
Civil Aerospace Organic revenues by £m FY 2021 FY 2020 change1 engine type Original Equipment 1,612 2,278 (29%) Large engine 1,297 1,696 (23%) COVID-19 impact seen Business aviation 310 574 (44%) across OE and Services V2500 5 8 (38%) Service 2,924 2,790 6% Large engine 1,958 1,608 22% Business avia
Slide 42: Trent engine products
Trent engine products Market Engines in Engines on £m Airframe share* service order Trent 7000 Airbus A330neo 100% 130 550 Leading widebody backlog market share Trent XWB Airbus A350 100% 764 859 Trent 1000 Boeing 787 33% 604 122 Trent 900 Airbus A380 48% 168 1 Trent 800 Boeing 777 40% 176 0 Trent 7
Slide 43: Civil Aerospace engine deliveries
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Civil Aerospace By engine engine deliveries RB211 22B 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 RB211 524 2 5 7 0 5 4 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 1
Slide 44: Civil Aerospace engine in-service
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Civil Aerospace By engine engine RB211 22B RB211 524 48 829 36 815 36 796 12 791 15 769 9 706 12 643 9 638 6 617 530 6 455 3 3 352 3 302 3 278 3 266 3 242 3 210 3 82 3 80 in-service RB211 535 RB211 Total 1
Slide 45: Civil Aerospace in-service thrust base
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Civil Thrust per engine Aerospace By engine RB211 22B (lbs) 60,000 3 2 2 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 in-service RB211 524 60,000 50 49 48 47 46 42 39 38 37 32 27 21 18 17 16 15 13 5 5 thrust base RB211
Slide 46: Safe harbour statement
Safe harbour statement This 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 re
Slide 47: 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 Paul Morris Investor Relations Associate paul.morris3@rolls-royce.com 47 2