2024 Half Year Results

About this update from Rolls-royce Holdings Plc

[{"type":"text","content":"\n \n This announcement contains inside information for the purposes of article 17(1) of the market abuse regulation (EU) 596/2014 \n   \n \n 1 August 2024 \n   \n \n \n \n ROLLS-ROYCE HOLDINGS PLC - 2024 Half Year Results \n   \n                                                                                                                                                                    \n \n \n \n \n Strong first half delivery gives confidence to raise guidance. \nShareholder distributions to be reinstated in respect of the full year 2024 results. \n \n \n \n \n   \n \n \n \n \n   \n \n \n - \n \n \n Underlying operating profit of £1.1bn and underlying margin of 14.0% reflects the impact of our strategic initiatives, with commercial optimisation and cost efficiency benefits across the Group \n \n \n \n \n   \n \n \n - \n \n \n Free cash flow of £1.2bn driven by higher operating profit and continued LTSA balance growth \n \n \n \n \n   \n \n \n - \n \n \n Return on capital [1] increased to 13.8% and represents significant value creation \n \n \n \n \n   \n \n \n - \n \n \n Net debt reduced to £0.8bn driven by statutory net cash flow from operating activities of £1.7bn \n \n \n \n \n   \n \n \n - \n \n \n Full year guidance raised in a challenging supply chain environment: we now expect underlying operating profit between £2.1bn and £2.3bn and free cash flow between £2.1bn and £2.2bn \n \n \n \n \n   \n \n \n - \n \n \n Reinstating shareholder distributions in respect of the full year 2024 results starting at a 30% pay-out ratio of underlying profit after tax with an ongoing pay-out ratio of 30-40% each year [2] \n \n \n \n \n   \n Tufan Erginbilgic, CEO said: \"Our transformation of Rolls-Royce into a high-performing, competitive, resilient, and growing business is proceeding with pace and intensity. We are expanding the earnings and cash potential of the business in a challenging supply chain environment, which we are proactively managing. We are on track to deliver our mid-term targets. \n Our strong first half results reflect the continued delivery of our strategic initiatives and a relentless focus on commercial optimisation and cost efficiencies across the Group. These results and our increased financial resilience give us the confidence to raise our 2024 guidance and reinstate shareholder distributions in respect of the full year 2024 results.\" \n   \n Half Year 2024 Group Results \n \n \n \n \n   \n \n \n Underlying \n H1 2024 [3] \n \n \n Underlying  H1 2023 3 \n \n \n Statutory \nH1 2024 \n \n \n Statutory \nH1 2023 \n \n \n \n \n £ million \n \n \n \n \n Revenue \n \n \n 8,182 \n \n \n 6,950 \n \n \n 8,861 \n \n \n 7,523 \n \n \n \n \n Operating profit \n \n \n 1,149 \n \n \n 673 \n \n \n 1,646 \n \n \n 797 \n \n \n \n \n Operating margin % \n \n \n 14.0% \n \n \n 9.7% \n \n \n 18.6% \n \n \n 10.6% \n \n \n \n \n Profit before taxation \n \n \n 1,035 \n \n \n 524 \n \n \n 1,416 \n \n \n 1,419 \n \n \n \n \n Basic earnings per share (pence) \n \n \n 8.95 \n \n \n 4.90 \n \n \n 13.71 \n \n \n 14.70 \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n Free cash flow \n \n \n 1,158 \n \n \n 356 \n \n \n \n \n \n \n \n \n \n \n Return on capital (%) \n \n \n 13.8% \n \n \n 9.0% \n \n \n \n \n \n \n \n \n \n \n Net cash flow from operating activities* \n \n \n \n \n \n \n \n \n 1,669 \n \n \n 925 \n \n \n \n \n * H1 2023 re-presented see page 17 \n   \n \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n 30 Jun 2024 \n \n \n 31 Dec 2023 \n \n \n \n \n Net debt \n \n \n \n \n \n \n \n \n (822) \n \n \n (1,952) \n \n \n \n \n \n [1]     Adjusted return on capital is defined on page 46 and is abbreviated to return on capital \n [2]     Subject to final Board recommendation and shareholder approval at the 2025 Annual General Meeting. This applies to all references to the reinstatement of shareholder distributions in this document. A 30-40% payout ratio will be applied to 'underlying profit after tax' which is equal to 'Underlying profit for the period' \n [3]     All underlying income statement commentary is provided on an organic basis unless otherwise stated. A reconciliation of alternative performance measures to their statutory equivalent is provided on pages 43 to 46 \n \n Half year 2024 performance summary \n ·    Significantly higher operating profit and margins in a challenging supply chain environment. Underlying operating profit rose by £0.5bn to £1.1bn, a 74% increase versus the prior period. This was driven by our transformation programme and strategic initiatives, with commercial optimisation and cost efficiency benefits across the Group. Underlying operating margin rose by 4.4pts to 14.0%. The largest improvement was in Civil Aerospace, which delivered an operating margin of 18.0% (H1 2023: 12.4%). This was driven by higher aftermarket profit from large engine LTSA (long term service agreements) and time and materials, stronger performance in business aviation in both original equipment (OE) and aftermarket and net contractual margin improvements. Defence delivered an underlying operating margin of 15.5% (H1 2023: 13.6%), driven by higher aftermarket profit in Combat and Transport. Submarines growth was also strong in the period. Power Systems reported an operating margin of 10.3% (H1 2023: 7.0%), driven by our pricing actions, particularly in Power Generation where we are capturing growing demand for data centres with improved margins. Across all divisions, our cost efficiency actions have helped to mitigate the impact of inflation. \n ·   Strong cash generation: Free cash flow was £1.2bn (H1 2023: £0.4bn), driven by strong operating profit and continued LTSA balance growth. Civil net LTSA balance growth net of risk and revenue sharing arrangements (RRSAs) of £544m (H1 2023: £609m) in the period was supported by higher large engine flying hours (EFH) and an improved normalised EFH rate, with LTSA invoiced flying hour receipts of £2.9bn (H1 2023: £2.3bn). The improvement in free cash flow versus the prior period was driven by higher underlying operating profit and reduced working capital outflows of £228m (H1 2023: £465m), with a reduction of inventory days of 12 versus H1 2023. \n ·    Building resilience: Total underlying cash costs as a proportion of underlying gross margin (TCC/GM) improved to 0.49x (H1 2023: 0.64x). Net debt reduced to £0.8bn (2023 FY: £2.0bn). We also reduced our gross debt position by repaying a €550 million bond from free cash flow and cancelled our last remaining £1bn UKEF-supported undrawn loan facility, both enabled by our more resilient and growing cash delivery. We now have drawn debt of £3.6bn, of which $1.0bn matures in 2025, and £1.6bn of lease liabilities. Together with cash and cash equivalents of £4.3bn, we have a robust liquidity position of £6.8bn at 30 June 2024 (2023 FY: £7.2bn). We are significantly improving cash flow across all core divisions, creating a more robust and less volatile Group free cash flow delivery. \n ·    Shareholder distributions to be reinstated in respect of the full year 2024 results: As we shared at our capital markets day in November 2023, we are committed to reinstating regular shareholder distributions. We are making strong progress strengthening the balance sheet and building resilience. As such, we are reinstating shareholder distributions in respect of the full year 2024 results, starting at a 30% pay-out ratio of underlying profit after tax to be paid in 2025. We expect over the mid-term regular shareholder distributions to be based on a 30-40% payout ratio of underlying profit after tax.   \n Transformation programme and strategic initiatives \n The success of our transformation programme and strategic initiatives is evident in our financial performance in the first half of 2024. We have made good progress, and there is still more to do. Our strategic framework is founded on four pillars: \n \n ·    Portfolio choices & partnerships: In Civil Aerospace, deliveries of the Pearl 700 are ramping up for the Gulfstream G700 business jet that entered into service in April 2024. We delivered 83 Pearl engines in the first half of the year and our commercial optimisation actions mean that business aviation engine deliveries are now mostly profitable. We have also invested to grow our capacity in Derby and Dahlewitz, which will allow us to deliver c.40% additional new engines per year from 2025 compared to 2023, with increased capacity to support rising aftermarket volumes. Last year, we identified areas for divestment, from which we expect to generate £1.0bn-£1.5bn gross proceeds by 2028. As part of this, we completed the disposals of our Direct Air Capture assets in the period and, on 31 July, the off-highway engines business in the lower power range in Power Systems. \n ·    Advantaged businesses & strategic initiatives: In Civil Aerospace, the Trent XWB-97 was our best-selling engine with 108 new orders placed in the first half of the year. Our £1.0bn investment programme to improve the time on wing of our modern engines is progressing well. Flight testing is about to commence for the Trent 1000 TEN HPT blade. This part will more than double the time on wing of the Trent 1000 TEN engine and is already in service on c.50% of the Trent 7000 fleet. We completed the design of further improvements for the Trent 1000 and 7000 that will deliver an incremental 25-30% time on wing benefit by the end of 2025. We have also tested improvements for the Trent XWB-84 that will further improve the fuel burn efficiency of this best-in-class engine. We continue to drive for improved commercial terms and lower costs across our widebody and business aviation contracts. This resulted in total contractual margin improvements of £431m (net contractual margin improvements were £223m including a charge of £208m largely associated with supply chain challenges). In Defence, we were selected to partner with prime contractor SNC to provide engines for the US Air Force Survivable Airborne Operations Center (SAOC) programme. In Power Systems, we are capturing demand in the fast-growing market for backup power for Data Centres with a more competitive business model and improved margins as a result of our value-based pricing approach. \n   \n ·    Efficiency & simplification : In total, we expect our Efficiency & Simplification programme to deliver more than £250m of cumulative savings by the end of 2024, on track to achieve our target of £400-500m of savings in the mid-term. Within this, we are also on track to deliver c.£200m per annum of organisational design benefits by the end of 2025. Our new organisational design came into effect on 1 June 2024, which creates a leaner, more focused organisation with fewer layers. In addition, we continue to focus on driving procurement synergies across the Group. By the end of 2024, we expect to deliver c.£0.5bn of cumulative gross third-party cost savings against our mid-term target of £1.0bn, to partly offset inflationary pressures. Supporting this is the roll-out of zero-based budgeting. We successfully completed pilots in Civil Aerospace which demonstrated savings of 10-15% in third party costs in the selected areas. The approach is now being rolled out across the Group. \n   \n ·   Lower carbon & digitally enabled businesses: In Power Systems, we are developing a highly efficient hydrogen reciprocating engine which is partly funded by the German government. In the Power Generation segment, we won major Battery Energy Storage Systems (BESS) contracts, including a contract with Latvia to install one of the largest BESS in the EU. Rolls-Royce SMR is one of two companies shortlisted by Vattenfall, the Swedish power company, to deploy a fleet of small modular reactors in the country. We continue to digitally enable our businesses. In Civil Aerospace, we have introduced machine learning and advanced imaging technologies to inspect turbine blades resulting in a faster, more consistent process that reduces the cost of shop visits and extends the time on wing of critical engine components. \n   \n These strategic initiatives and our transformation programme are expanding the earnings and cash potential of the business. \n \n Outlook and 2024 Guidance \n Following a strong first half delivery across all divisions, we are raising our full year 2024 guidance. This reflects the continued execution of our strategic initiatives, notably commercial optimisation and cost efficiencies, and is despite the impact of prolonged supply chain challenges. \n \n \n \n \n 2024 financial guidance \n \n \n Updated \n \n \n Previous \n \n \n \n \n Underlying operating profit \n \n \n £2.1bn-£2.3bn \n \n \n £1.7bn-£2.0bn \n \n \n \n \n Free cash flow \n \n \n £2.1bn-£2.2bn \n \n \n £1.7bn-£1.9bn \n \n \n \n \n   \n Our updated free cash flow guidance for full year 2024 includes a £150-200m cash impact related to the supply chain, where parts availability remains constrained. We anticipate a continued impact to free cash flow for a further 18-24 months as supply chain challenges persist. We are actively managing these challenges and seek to mitigate the costs. \n Our 2024 free cash flow guidance is based on civil net LTSA creditor growth at the low end of the mid-term range (£0.8bn - £1.2bn), compared to £1.1bn in 2023. In Civil Aerospace, we continue to expect 2024 large EFHs will grow to 100-110% of 2019's level, 500-550 total original equipment (OE) deliveries and 1,300-1,400 total shop visits. \n Strong progress in the early years of our plan demonstrates a front-end loaded delivery of performance improvements. Our 2023 performance and 2024 guidance on operating profit and free cash flow means that by the end of 2024 we expect to deliver more than 75% of the profit and more than 65% of the free cash flow improvement set out in our mid-term targets. As a reminder, our mid-term targets are underlying operating profit of £2.5-2.8bn, an operating margin of 13-15%, free cash flow of £2.8-3.1bn and return on capital of 16-18%. These targets are based upon our expectations for a 2027 timeframe. \n Financial performance by business \n \n \n \n \n £ million \n \n \n Underlying revenue \n \n \n Organic change 1 \n \n \n Underlying operating profit/(loss) \n \n \n Organic change 1 \n \n \n Underlying operating margin \n \n \n Organic margin change (pts) \n \n \n \n \n Civil Aerospace \n \n \n 4,119 \n \n \n 27% \n \n \n 740 \n \n \n 85% \n \n \n 18.0% \n \n \n 5.6pt \n \n \n \n \n Defence \n \n \n 2,219 \n \n \n 18% \n \n \n 345 \n \n \n 34% \n \n \n 15.5% \n \n \n 1.9pt \n \n \n \n \n Power Systems \n \n \n 1,837 \n \n \n 6% \n \n \n 189 \n \n \n 56% \n \n \n 10.3% \n \n \n 3.3pt \n \n \n \n \n New Markets \n \n \n 2 \n \n \n nm 2 \n \n \n  (91) \n \n \n 18% \n \n \n nm 2 \n \n \n nm 2 \n \n \n \n \n Other businesses \n \n \n 5 \n \n \n nm 2 \n \n \n - \n \n \n nm 2 \n \n \n nm 2 \n \n \n nm 2 \n \n \n \n \n Corporate/eliminations \n \n \n - \n \n \n nm 2 \n \n \n (34) \n \n \n (3%) \n \n \n nm 2 \n \n \n nm 2 \n \n \n \n \n Total \n \n \n 8,182 \n \n \n 19% \n \n \n 1,149 \n \n \n 74% \n \n \n 14.0% \n \n \n 4.4pt \n \n \n \n \n 1   Organic change is the measure of change at constant translational currency applying full year 2023 average rates to 2023 and 2024. All underlying income statement commentary is provided on an organic basis unless otherwise stated \n 2   nm is defined as not meaningful \n   \n Trading cash flow \n \n \n \n \n £ million \n \n \n H1 2024 \n \n \n H1 2023 \n \n \n \n \n Civil Aerospace \n \n \n 1,038 \n \n \n 401 \n \n \n \n \n Defence \n \n \n 234 \n \n \n 76 \n \n \n \n \n Power Systems \n \n \n 121 \n \n \n 22 \n \n \n \n \n New Markets \n \n \n (68) \n \n \n (42) \n \n \n \n \n Other businesses \n \n \n (3) \n \n \n 8 \n \n \n \n \n Corporate/eliminations \n \n \n (33) \n \n \n (34) \n \n \n \n \n Total trading cash flow \n \n \n 1,289 \n \n \n 431 \n \n \n \n \n Underlying operating profit charge exceeded by contributions to defined benefit schemes \n \n \n (18) \n \n \n (16) \n \n \n \n \n Taxation \n \n \n (113) \n \n \n (59) \n \n \n \n \n Total free cash flow \n \n \n 1,158 \n \n \n 356 \n \n \n \n \n     \n \n Civil Aerospace \n \n \n \n \n H1 2024 key Civil Aerospace operational metrics: \n \n \n Large engine \n \n \n Business aviation/ regional \n \n \n Total \n \n \n Change \n \n \n \n \n OE deliveries \n \n \n 120 \n \n \n 116 \n \n \n 236 \n \n \n 48 \n \n \n \n \n LTSA engine flying hours (millions) \n \n \n 7. 6 \n \n \n 1.4 \n \n \n 9.0 \n \n \n 1.3 \n \n \n \n \n Total LTSA shop visits \n \n \n 413 \n \n \n 211 \n \n \n 624 \n \n \n 33 \n \n \n \n \n …of which major shop visits \n \n \n 195 \n \n \n 199 \n \n \n 394 \n \n \n 63 \n \n \n \n \n   \n Significantly improved Civil Aerospace performance reflects higher large engine aftermarket and time and materials profit, stronger business aviation profit in both OE and aftermarket, net margin contractual improvements and the benefits of cost efficiency actions. \n In the first half of 2024, a total of 273 large engines were ordered with a gross book-to-bill of 2.3x. Significant new orders included Indigo, Korean Air, Delta and VietJet. With 108 orders, the Trent XWB-97 was our bestselling engine in the period. As a result of strong order inflow, our large engine order book increased by 9% to 1,773 engines at the end of June 2024. \n Total OE deliveries rose by 26% to 236 engines, with 116 business aviation deliveries (H1 2023: 73) and 120 total large engine deliveries (H1 2023: 115). In the first half of 2024 we delivered 21 large spare engines (H1 2023: 18), which represented 18% of total large engine deliveries (H1 2023: 16%). Total shop visits increased 6% versus the prior period to 624 (H1 2023: 591), of these 195 were large engine major shop visits (H1 2023: 144). \n Underlying revenue of £4.1bn increased 27%, driven by higher shop visits volumes, OE engine deliveries and commercial optimisation. Underlying OE revenue grew by 27% in the period to £1.3bn and services revenue grew by 27% to £2.8bn. LTSA revenue catch-ups were £258m (H1 2023: £23m). \n Underlying operating profit was £740m (18.0% margin) versus £405m in H1 2023 (12.4% margin). The improvement versus the prior period was driven by higher large engine aftermarket profit, reflecting increased LTSA margins and volumes and a higher time and materials profit, combined with stronger business aviation profit in both OE and aftermarket. Higher underlying operating profit also reflects the benefit of net contractual margin improvements as well as cost efficiencies which helped to mitigate the impact of inflation, with indirect costs slightly lower versus the prior period. \n Our efforts to improve the commercial terms and reduce costs across our large engine and business aviation contracts supported total contractual margin improvements of £431m in the period. These benefits were partially offset by £208m of additional charges largely associated with the impact of prolonged supply chain challenges, which were booked across onerous provisions and contract catch-ups. As a result, net contractual margin improvements were £223m (H1 2023: £105m), comprising contract catch-ups of £216m (H1 2023: £70m) and net onerous provision releases of £7m (H1 2023: £35m). \n We expect a lower underlying operating profit margin in H2 2024 due to higher OE deliveries and shop visit mix, notably an increased number of Trent 1000 major shop visits. \n Trading cash flow of £1,038m (H1 2023: £401m) reflects higher operating profit and continued net LTSA balance growth net of risk and revenue sharing arrangements (RRSAs) of £544m (H1 2023: £609m). LTSA balance growth in the period was supported by a higher normalised EFH rate due to our commercial actions and growth in large EFHs. Large EFHs rose by 22% versus the prior period to 101% of 2019 levels, due to continued strong demand for travel and our young, growing wide-body fleet. Business aviation and regional EFHs were broadly unchanged in the period. \n   \n Defence \n Higher operating profit in Defence reflects Transport and Combat aftermarket profit growth, Submarine growth and cost efficiencies across the business. \n Demand remained strong, notably across Combat and Submarines, with order intake of £1.7bn in the period and a book-to-bill ratio of 0.8x. This brings our order backlog to £8.5bn at the end of the period, with order cover approaching 100% for the remainder of 2024. In the first half of the year, we were selected to form part of the team led by prime contractor SNC, to modernise and deliver a replacement for the United States Air Force's current fleet of E-4B \"Nightwatch\" aircraft as part of the SAOC contract. This order is expected to have a near term benefit to earnings. \n Revenue increased by 18% [4] to £2.2bn (H1 2023: £1.9bn). Growth was led by Submarines and Combat which reported growth of 84 4 % and 10%, respectively. Total OE revenues grew by 5% versus last year to £0.9bn driven by increased submarine volumes. Services revenues grew by 27% to £1.3bn [5] supported by a more favourable shop mix visit and improved pricing. \n Operating profit was £345m (15.5% margin) versus £261m (13.6% margin) in the prior period. The improvement in operating profit reflects strong aftermarket profit growth in Combat and Transport, with an improved margin. Strong submarines growth reflects the ramp up of programmes including AUKUS. Higher operating profit was also supported by cost efficiencies, including an increase in customer funded R&D. \n We expect a lower underlying operating profit margin in H2 2024, as a result of a less favourable aftermarket mix and increased OE deliveries. \n Trading cash flow of £234m increased versus £76m prior period, driven by higher underlying operating profit and an improved working capital performance. \n [4]    Defence revenue growth of 18% and Submarines revenue growth of 84% includes a c.£180m benefit of a one-off capital and lease transaction. Excluding this, Defence revenue growth was 8% and Submarines revenue growth was 40% \n [5]  Services revenues include a c.£180m benefit of a one-off capital and lease transaction in Submarines \n Power Systems \n In Power Systems, our actions on pricing and costs have continued to drive profitable growth, particularly in the Power Generation segment where we are capturing the benefit of strong demand for data centres. \n Order intake in Power Systems was £2.4bn, 26% up versus the prior period, with a book-to-bill ratio of 1.3x. OE order coverage for the remainder of 2024 is 100% and 44% for 2025. Demand remains particularly strong in Power Generation and Governmental. \n Underlying revenue was £1.8bn, an increase of 6% versus the prior period. This was driven by Power Generation and Governmental, which reported revenue growth of 15% and 12%, respectively. Underlying OE revenues grew by 10% to £1.3bn. Underlying Services revenue was broadly flat versus the prior period at £0.6bn. \n Underlying operating profit grew by 56% to £189m. Underlying operating margin rose by 3.3pts to 10.3% (H1 2023: 7.0%). The increase in underlying operating profit reflects continued commercial optimisation benefits across all categories, notably in Power Generation, and cost efficiencies. \n We expect a higher underlying operating profit margin in H2 2024 reflecting the typical seasonality of the business. \n Trading cash flow was £121m with a conversion ratio of 64% versus £22m and 18% last year. The increase in trading cash flow was mainly due to increased operating profit with working capital continuing to be tightly managed. \n   \n New Markets \n Rolls-Royce SMR (small modular reactors) has completed step two of the Generic Design Assessment (GDA) regulatory process in the UK and moved into the third and final step on 30 July 2024. Rolls-Royce is the only European company to have reached this milestone, adding to our competitive advantage. First power is still planned in the early 2030s, which will be dependent on securing orders from the UK Government's SMR procurement process.   \n Rolls-Royce SMR is one of two companies that have been shortlisted by Vattenfall, to potentially deploy a fleet of SMRs in Sweden. The programme is part of Vattenfall's plans to meet the rising demand for electricity, adding nuclear capacity and helping Sweden to achieve its goal of creating a fossil-free economy by 2045. Rolls-Royce SMR is in a range of selection processes with a number of counterparts. \n Planned cost increases in SMR to meet development milestones resulted in an increased operating loss of £(91)m versus £(78)m in the prior period. \n Trading cash flow was an outflow of £(68)m compared to £(42)m in the prior period. \n \n Statutory and underlying Group financial performance \n   \n \n \n \n \n   \n \n \n H1 2024 \n \n \n H1 2023 \n \n \n \n \n £ million \n \n \n Statutory \n \n \n Impact of hedge book 1 \n \n \n Impact of acquisition accounting \n \n \n Impact of other non-underlying items \n \n \n Underlying \n \n \n Underlying \n \n \n \n \n Revenue \n \n \n 8,861 \n \n \n (679) \n \n \n - \n \n \n - \n \n \n 8,182 \n \n \n 6,950 \n \n \n \n \n Gross profit \n \n \n 2,108 \n \n \n (73) \n \n \n 22 \n \n \n (80) \n \n \n 1,977 \n \n \n 1,515 \n \n \n \n \n Operating profit \n \n \n 1,646 \n \n \n (82) \n \n \n 23 \n \n \n (438) \n \n \n 1,149 \n \n \n 673 \n \n \n \n \n Net financing income/(costs) \n \n \n (230) \n \n \n 54 \n \n \n - \n \n \n 62 \n \n \n (114) \n \n \n (149) \n \n \n \n \n Profit before taxation \n \n \n 1,416 \n \n \n (28) \n \n \n 23 \n \n \n (376) \n \n \n 1,035 \n \n \n 524 \n \n \n \n \n Taxation 2 \n \n \n (280) \n \n \n 7 \n \n \n (6) \n \n \n (19) \n \n \n (298) \n \n \n (120) \n \n \n \n \n Profit for the period \n \n \n 1,136 \n \n \n (21) \n \n \n 17 \n \n \n (395) \n \n \n 737 \n \n \n 404 \n \n \n \n \n Basic earnings per share (pence) \n \n \n 13.71 \n \n \n   \n \n \n   \n \n \n   \n \n \n 8.95 \n \n \n 4.90 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 1   Reflecting the impact of measuring revenue and costs at the average exchange rate during the period and the valuation of assets and liabilities using the period end exchange rate rather than the rate achieved on settled foreign exchange contracts in the period or the rate expected to be achieved by the use of the hedge book \n 2   Statutory taxation includes the recognition of a deferred tax asset on UK tax losses of £157m \n Revenue : Underlying revenue of £8.2bn was up 19%, with strong growth in all divisions, notably Civil Aerospace. Statutory revenue of £8.9bn was 18% higher compared with the prior period. The difference between statutory and underlying revenue is driven by statutory revenue being measured at average prevailing exchange rates (H1 2024: GBP:USD 1.27; H1 2023: GBP:USD 1.23) and underlying revenue being measured at the hedge book achieved rate during the period (H1 2024 GBP:USD 1.48; H1 2023:GBP:USD 1.50). \n Operating profit : Underlying operating profit of £1.1bn (14.0% margin) versus £673m (9.7% margin) in the prior period. Underlying operating profit was higher in all three core divisions, reflecting commercial optimisation and cost efficiencies across the Group. The largest improvement in margins was in Civil Aerospace, driven by higher LTSA aftermarket and business aviation profits. Defence and Power Systems margins also rose materially. Statutory operating profit was £1.6bn, higher than the £1.1bn underlying operating profit largely due to a £545m impairment reversal related to a Civil Aerospace programme asset impairment that was recognised in 2020 and £82m negative impact from currency hedges in the underlying results. Charges of £130m were excluded from the underlying results as these related to non-underlying items comprising net transformation and restructuring charges of £107m; and £23m relating to the amortisation of intangible assets arising on previous acquisitions. \n Profit before taxation : Underlying profit before taxation of £1.0bn included £(114)m net financing costs comprising £128m interest receivable, £(137)m interest payable and £(105)m of other financing charges and costs of undrawn facilities. Statutory profit before tax of £1.4bn included £(179)m net fair value losses on derivative contracts, £(60)m net interest payable, net foreign exchange gains of £120m and £(111)m other financing charges and costs of undrawn facilities. \n Taxation : Underlying tax charge of £(298)m (H1 2023: £(120)m) reflects an overall tax charge on profits of Group companies as well as a tax charge of £(100)m on a de-grouping gain in the UK and a tax credit of £34m relating to the recognition of some of the deferred tax asset on UK tax losses. These are also reflected in the statutory tax charge of £(280)m (H1 2023: £(196)m) together with an additional tax credit on the recognition of a £123m deferred tax asset relating to UK tax losses. In addition, included in the £(280)m tax charge is a £10m tax credit related to the reduction in the UK tax rate on authorised pension surpluses, a tax charge of £(40)m related to unrealised foreign exchange derivatives and a £(75)m tax charge related to other non-underlying items. \n   \n Free cash flow \n   \n \n \n \n \n \n \n \n H1 2024 \n \n \n H1 2023 \n \n \n \n \n £ million \n \n \n Cash flow \n \n \n Impact of hedge book \n \n \n Impact of acquisition accounting \n \n \n Impact of other non-underlying items \n \n \n Funds flow \n \n \n Funds flow \n \n \n   \n \n \n \n \n Operating profit \n \n \n 1,646 \n \n \n (82) \n \n \n 23 \n \n \n (438) \n \n \n 1,149 \n \n \n 673 \n \n \n   \n \n \n \n \n Depreciation, amortisation and impairment \n \n \n 51 \n \n \n - \n \n \n (23) \n \n \n 399 \n \n \n 427 \n \n \n 489 \n \n \n   \n \n \n \n \n Movement in provisions \n \n \n 38 \n \n \n (108) \n \n \n - \n \n \n (36) \n \n \n (106) \n \n \n (95) \n \n \n   \n \n \n \n \n Movement in Civil LTSA balance \n \n \n 788 \n \n \n (73) \n \n \n - \n \n \n - \n \n \n 715 \n \n \n 727 \n \n \n   \n \n \n \n \n Movement in prepayments to RRSAs for LTSA parts \n \n \n (272) \n \n \n 101 \n \n \n - \n \n \n - \n \n \n (171) \n \n \n (118) \n \n \n   \n \n \n \n \n Movement in costs to obtain contracts \n \n \n 6 \n \n \n 1 \n \n \n - \n \n \n - \n \n \n 7 \n \n \n 7 \n \n \n   \n \n \n \n \n Settlement of excess derivatives 1 \n \n \n (75) \n \n \n - \n \n \n - \n \n \n - \n \n \n (75) \n \n \n (210) \n \n \n   \n \n \n \n \n Interest received \n \n \n 124 \n \n \n - \n \n \n - \n \n \n - \n \n \n 124 \n \n \n 60 \n \n \n   \n \n \n \n \n Other operating cash flows 2 \n \n \n (21) \n \n \n 11 \n \n \n - \n \n \n - \n \n \n (10) \n \n \n (74) \n \n \n   \n \n \n \n \n Operating cash flow before working capital and income tax \n \n \n 2,285 \n \n \n (150) \n \n \n - \n \n \n (75) \n \n \n 2,060 \n \n \n 1,459 \n \n \n   \n \n \n \n \n Working capital 3 \n \n \n (93) \n \n \n (265) \n \n \n - \n \n \n 130 \n \n \n (228) \n \n \n (465) \n \n \n   \n \n \n \n \n Cash flows on other financial assets and liabilities held for operating purposes \n \n \n (410) \n \n \n 405 \n \n \n - \n \n \n - \n \n \n (5) \n \n \n 6 \n \n \n   \n \n \n \n \n Income tax \n \n \n (113) \n \n \n - \n \n \n - \n \n \n - \n \n \n (113) \n \n \n (59) \n \n \n   \n \n \n \n \n Cash from operating activities \n \n \n 1,669 \n \n \n (10) \n \n \n - \n \n \n 55 \n \n \n 1,714 \n \n \n 941 \n \n \n   \n \n \n \n \n Capital element of lease payments \n \n \n (122) \n \n \n 10 \n \n \n - \n \n \n - \n \n \n (112) \n \n \n (157) \n \n \n   \n \n \n \n \n Capital expenditure \n \n \n (291) \n \n \n - \n \n \n - \n \n \n - \n \n \n (291) \n \n \n (285) \n \n \n   \n \n \n \n \n Investment \n \n \n 17 \n \n \n - \n \n \n - \n \n \n - \n \n \n                  17 \n \n \n 17 \n \n \n   \n \n \n \n \n Interest paid \n \n \n (157) \n \n \n - \n \n \n - \n \n \n - \n \n \n (157) \n \n \n (159) \n \n \n   \n \n \n \n \n Other \n \n \n 42 \n \n \n - \n \n \n - \n \n \n (55) \n \n \n (13) \n \n \n (1) \n \n \n   \n \n \n \n \n Free cash flow \n \n \n 1,158 \n \n \n - \n \n \n - \n \n \n - \n \n \n 1,158 \n \n \n 356 \n \n \n   \n \n \n \n \n 1  The funds flow to 30 June 2023 has been re-presented to disclose cash flows on settlement of excess derivative contracts as cash flows from operating activities. As a result, operating cash flows before working capital and income tax during the period to 30 June 2023 have reduced by £(210)m to £941m. Cash flows on settlement of excess derivative contracts were previously shown after cash from operating activities in arriving at free cash flow. There is no impact to free cash flow \n 2  Other operating cash flows include profit/(loss) on disposal, share of results and dividends received from joint ventures and associates, cash flows relating to our defined benefit post-retirement schemes, and share based payments \n 3  Working capital includes inventory, trade and other receivables and payables, and contract assets and liabilities (excluding Civil LTSA balances, prepayment to RRSAs and costs to obtain contracts). Working capital was previously defined as inventory, trade and other receivables and payables, and contract assets and liabilities, excluding Civil LTSA balances \n \n Free cash flow in the year was £1.2bn, an improvement of £0.8bn compared with the prior period driven by: \n Underlying operating profit of £1.1bn, £0.5bn higher than the prior period. This reflects improved underlying operating profit and margins in all three core divisions, notably Civil Aerospace, driven by our actions on commercial optimisation and cost efficiencies. \n Movement in provisions of £(106)m driven by movements across several provisions held, including contract losses, warranty and guarantees and Trent 1000. \n Movement in Civil LTSA balance was £715m, similar to the prior period (£727m), driven by higher EFHs and an improved normalised EFH rate. \n Movements in prepayments to RRSAs for LTSA parts of £(171)m (H1 2023: £(118)m), higher than the prior period primarily a result of contract restructuring to drive overall longer term benefits. \n Working capital outflows of £(228)m, compared to £(465)m in the prior period. Inventory increased by £(641)m as a result of inventory build in line with requirements to meet demand across the divisions, along with continued supply chain disruption. There was a net £413m inflow from receivables, payables and contract liabilities reflecting volume growth and timing. \n Income tax of £(113)m , net cash tax payments for the first half of 2024 were higher than the prior period (£(59)m) due to timing, including final payments made in respect of the prior year. \n The capital element of lease payments was £(112)m , £45m lower than the prior period as a result of timing of lease payments. \n Capital expenditure of £(291)m , includes £(133)m of property, plant and equipment additions and £(165)m of intangibles additions. The combined additions were higher than the prior period as a result of investment in site improvements across the Group. \n Interest paid of £(157)m , including lease interest payments, is broadly in line with the prior period. The reduction in interest charges, as a result of the termination of a £1bn UKEF and £1bn term loan in 2023, has been largely offset by higher interest charges on gross overdrafts. \n Balance Sheet  \n \n \n \n \n £ million \n \n \n 30 Jun 2024 \n \n \n 31 Dec 2023 \n \n \n Change \n \n \n \n \n Intangible assets \n \n \n 4,426 \n \n \n 4,009 \n \n \n 417 \n \n \n \n \n Property, plant and equipment \n \n \n 3,637 \n \n \n 3,728 \n \n \n (91) \n \n \n \n \n Right of use assets \n \n \n 815 \n \n \n 905 \n \n \n (90) \n \n \n \n \n Joint ventures and associates \n \n \n 540 \n \n \n 479 \n \n \n 61 \n \n \n \n \n Civil LTSA 1 \n \n \n (9,868) \n \n \n (9,080) \n \n \n (788) \n \n \n \n \n RRSA prepayments for LTSA parts 1 \n \n \n 1,592 \n \n \n 1,320 \n \n \n 272 \n \n \n \n \n Costs to obtain contracts 1 \n \n \n 110 \n \n \n 116 \n \n \n (6) \n \n \n \n \n Working capital 1 \n \n \n (1,265) \n \n \n (1,502) \n \n \n 237 \n \n \n \n \n Provisions \n \n \n (2,073) \n \n \n (2,029) \n \n \n (44) \n \n \n \n \n Net debt 2 \n \n \n (822) \n \n \n (1,952) \n \n \n 1,130 \n \n \n \n \n Net financial assets and liabilities 2 \n \n \n (1,812) \n \n \n (2,060) \n \n \n 248 \n \n \n \n \n Net post-retirement scheme deficits \n \n \n (99) \n \n \n (253) \n \n \n 154 \n \n \n \n \n Taxation \n \n \n 2,527 \n \n \n 2,605 \n \n \n (78) \n \n \n \n \n Held for sale 3 \n \n \n 51 \n \n \n 54 \n \n \n (3) \n \n \n \n \n Other net assets and liabilities \n \n \n 4 \n \n \n 31 \n \n \n (27) \n \n \n \n \n Net liabilities \n \n \n (2,237) \n \n \n (3,629) \n \n \n 1,392 \n \n \n \n \n Other items \n \n \n \n \n \n \n \n \n \n \n \n \n \n US$ hedge book (US$bn) \n \n \n 16 \n \n \n 15 \n \n \n \n \n \n \n \n 1   The total of these lines represent inventory, trade receivables and payables, contract assets and liabilities and other assets and liabilities in the statutory balance sheet \n 2   Net debt includes £9m (2023: £23m) of the fair value of derivatives included in fair value hedges and the element of fair value relating to exchange differences on the underlying principal of derivatives in cash flow hedges    \n 3   Held for sale assets relate to the sale of the off-highway engines business in the lower power range based in Power Systems \n Key drivers of balance sheet movements were: \n Intangible assets: The £0.4bn increase is a result of an impairment reversal related to a Civil Aerospace programme asset impairment that was recognised in 2020. \n Civil LTSA: The £(0.8)bn movement in the net liability balance was mainly driven by an increase in invoiced LTSA receipts exceeding revenue recognised in the year. This is especially prevalent on new contracts where shop visits are not immediately scheduled. \n RRSA prepayments for LTSA parts: The £0.3bn increase corresponds to the increase seen in the Civil LTSA balance above. RRSA prepayments typically move in line with the Civil LTSA as the RRSA prepayment represents amounts that we have paid to Risk and Revenue Share Partners for the parts that they will ultimately provide in support of our contracts. \n Working capital : The £(1.3)bn net working capital position decreased by £0.2bn compared to the prior period. The movement comprised £0.6bn increase in inventory across the divisions reflecting higher sales volumes and supply chain disruption, a decrease in contract liabilities of £0.3bn driven by advanced payments received across the divisions partly offset by £(0.5)bn increase in payables due to changes in operational volumes and timing of supplier payments and £(0.2)bn reduction in receivables driven by lower prepayments from customers and lower RRSP receivables partly offset by higher trading volumes. \n Provisions : The £44m net increase in provisions was due to a net increase in the provision for warranty & guarantees driven by increased volumes and trading, a net increase in contract loss provisions due to additional contract losses being greater than contract loss reversals and utilisation, and a net increase in provisions for severance costs related to the multi-year transformation programme. These were partly offset by utilisation of the Trent 1000 provision. \n Net debt : Decreased from £(2.0)bn to £(0.8)bn driven by a free cash inflow of £1.2bn. Our liquidity position is strong with £6.8bn of liquidity including cash and cash equivalents of £4.3bn and undrawn facilities of £2.5bn. During the period, the Group repaid a €550m bond in line with its maturity date. Net debt included £(1.6)bn of lease liabilities (2023 FY: £(1.7)bn). \n Net financial assets and liabilities : A £0.2bn reduction in the net financial liabilities driven by contracts maturing in the period, partly offset by a change in fair value of derivative contracts largely due to the impact of the movement in GBP:USD exchange rates. \n Taxation : The net tax asset reduced by £(78)m. The decrease relates to £(172)m reduction in non-UK deferred tax assets, primarily driven by an impairment reversal, £(61)m reduction in other deferred tax assets, partly offset by the recognition of a £157m deferred tax asset relating to UK tax losses. Deferred tax liabilities have decreased by £47m, mainly due to a reduction in the UK tax rate applied to authorised pension surpluses. Net current tax liabilities have increased by £(49)m. \n Results meeting and webcast \n Our results presentation will be held at UBS, 5 Broadgate, London EC2M 2QS and webcast live at 10:30 (BST) today. Downloadable materials will also be available on the Investor Relations section of the Rolls-Royce website: https://www.rolls-royce.com/investors/results-and-events.aspx \n   \n To register for the webcast, including Q&A participation, please visit the following link: Rolls-Royce 2024 Half Year Results - webinar.net \n   \n Please use this same link to access the webcast replay which will be made available shortly after the event concludes. Photographs and broadcast-standard video are available at www.rolls-royce.com \n Enquiries: \n   \n \n \n \n \n Investors : \n \n \n \n \n \n \n \n \n Media : \n \n \n \n \n \n \n \n Jeremy Bragg \n   \n \n \n +44 7795 840875 \n   \n \n \n \n \n \n Richard Wray \n \n \n +44 7810 850055 \n \n \n \n \n   \n This results announcement contains forward-looking statements. Any statements that express forecasts, expectations and projections are not guarantees of future performance and will not be updated. By their nature, these statements involve risk and uncertainty, and a number of factors could cause material differences to the actual results or developments. This report is intended to provide information to shareholders, is not designed to be relied upon by any other party, or for any other purpose and Rolls-Royce Holdings plc and its directors accept no liability to any other person other than under English law. \n   \n LSE: RR.; ADR: RYCEY; LEI: 213800EC7997ZBLZJH69 \n \n \n \n Condensed Consolidated Interim Financial Statements \n Condensed consolidated income statement \n For the half-year ended 30 June 2024 \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n Half-year to 30 June 2024 \n \n \n Half-year to \n30 June 2023 \n \n \n \n \n \n \n \n \n \n \n   \n \n \n Notes \n \n \n £m  \n \n \n £m \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Revenue \n \n \n \n \n \n   \n \n \n 2 \n \n \n 8,861 \n \n \n 7,523 \n \n \n   \n \n \n \n \n Cost of sales 1,3 \n \n \n \n \n \n   \n \n \n \n \n \n (6,753) \n \n \n (5,866) \n \n \n   \n \n \n \n \n Gross profit \n \n \n \n \n \n   \n \n \n 2 \n \n \n 2,108 \n \n \n 1,657 \n \n \n   \n \n \n \n \n Commercial and administrative costs  \n \n \n \n \n \n   \n \n \n 2 \n \n \n (641) \n \n \n (560) \n \n \n   \n \n \n \n \n Research and development 3 \n \n \n \n \n \n   \n \n \n 2, 3 \n \n \n 101 \n \n \n (389) \n \n \n   \n \n \n \n \n Share of results of joint ventures and associates \n \n \n \n \n \n   \n \n \n \n \n \n 78 \n \n \n 89 \n \n \n   \n \n \n \n \n Operating profit \n \n \n \n \n \n   \n \n \n \n \n \n 1,646 \n \n \n 797 \n \n \n   \n \n \n \n \n Gain arising on disposal of businesses \n \n \n \n \n \n   \n \n \n \n \n \n - \n \n \n 1 \n \n \n   \n \n \n \n \n Profit before financing and taxation \n \n \n \n \n \n   \n \n \n \n \n \n 1,646 \n \n \n 798 \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Financing income \n \n \n \n \n \n   \n \n \n 4 \n \n \n 306 \n \n \n 934 \n \n \n   \n \n \n \n \n Financing costs \n \n \n \n \n \n   \n \n \n 4 \n \n \n (536) \n \n \n (313) \n \n \n   \n \n \n \n \n Net financing (costs)/income 2 \n \n \n \n \n \n   \n \n \n \n \n \n (230) \n \n \n 621 \n \n \n   \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Profit before taxation \n \n \n \n \n \n   \n \n \n \n \n \n 1,416 \n \n \n 1,419 \n \n \n   \n \n \n \n \n Taxation \n \n \n \n \n \n   \n \n \n 5 \n \n \n (280) \n \n \n (196) \n \n \n   \n \n \n \n \n Profit for the period \n \n \n \n \n \n   \n \n \n \n \n \n 1,136 \n \n \n 1,223 \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Attributable to: \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Ordinary shareholders \n \n \n \n \n \n   \n \n \n \n \n \n 1,149 \n \n \n 1,229 \n \n \n   \n \n \n \n \n Non-controlling interests (NCI) \n \n \n \n \n \n   \n \n \n \n \n \n (13) \n \n \n (6) \n \n \n   \n \n \n \n \n Profit for the period \n \n \n \n \n \n   \n \n \n \n \n \n 1,136 \n \n \n 1,223 \n \n \n   \n \n \n \n \n Other comprehensive income/(expense) \n \n \n \n \n \n   \n \n \n \n \n \n 123 \n \n \n (226) \n \n \n   \n \n \n \n \n Total comprehensive income for the period \n \n \n \n \n \n   \n \n \n \n \n \n 1,259 \n \n \n 997 \n \n \n   \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Earnings per ordinary share attributable to ordinary shareholders: \n \n \n \n \n \n   \n \n \n 6 \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n Basic \n \n \n \n \n \n   \n \n \n \n \n \n 13.71p \n \n \n 14.70p \n \n \n   \n \n \n \n \n Diluted \n \n \n \n \n \n   \n \n \n \n \n \n 13.63p \n \n \n 14.67p \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 1    Cost of sales includes a net charge for expected credit losses (ECLs) of £19m (30 June 2023: £19m release). Further details can be found in note 10 \n 2   Included within net financing are fair value changes on derivative contracts. Further details can be found in notes 2, 4 and 14 \n 3   The impact of an exceptional impairment reversal relating to a Civil Aerospace programme impairment that was recognised in 2020 is included within cost of sales, £132m, and research and development, £413m. Further details can be found in notes 2 and 7 \n \n   \n Condensed consolidated statement of comprehensive income \n For the half-year ended 30 June 2024 \n \n \n \n \n \n \n \n \n \n \n Half-year to 30 June 2024 \n \n \n Half-year to 30 June 2023 \n \n \n \n \n \n \n \n Notes \n \n \n £m \n \n \n £m \n \n \n \n \n Profit for the period \n \n \n   \n \n \n 1,136 \n \n \n 1,223 \n \n \n \n \n Other comprehensive income/(expense) (OCI) \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n    Actuarial movements in post-retirement schemes \n \n \n 16 \n \n \n 124 \n \n \n (35) \n \n \n \n \n    Revaluation to fair value of other investments \n \n \n \n \n \n (3) \n \n \n 1 \n \n \n \n \n    Share of OCI of joint ventures and associates \n \n \n \n \n \n (6) \n \n \n (1) \n \n \n \n \n    Related tax movements \n \n \n \n \n \n 35 \n \n \n 11 \n \n \n \n \n Items that will not be reclassified to profit or loss \n \n \n \n \n \n 150 \n \n \n (24) \n \n \n \n \n    \n \n \n \n \n \n   \n \n \n \n \n \n \n \n    Foreign exchange translation differences on foreign operations \n \n \n \n \n \n (24) \n \n \n (227) \n \n \n \n \n    Movement on fair values charged to cash flow hedge reserve (CFHR) \n \n \n \n \n \n (16) \n \n \n (31) \n \n \n \n \n    Reclassified to income statement from CFHR \n \n \n \n \n \n 15 \n \n \n 64 \n \n \n \n \n Share of OCI of joint ventures and associates \n \n \n \n \n \n (2) \n \n \n - \n \n \n \n \n Related tax movements \n \n \n \n \n \n - \n \n \n (8) \n \n \n \n \n Items that will be reclassified to profit or loss \n \n \n \n \n \n (27) \n \n \n (202) \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Total other comprehensive income/(expense) \n \n \n   \n \n \n 123 \n \n \n (226) \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Total comprehensive income for the period \n \n \n   \n \n \n 1,259 \n \n \n 997 \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Attributable to: \n \n \n   \n \n \n   \n \n \n \n \n \n \n \n Ordinary shareholders \n \n \n   \n \n \n 1,272 \n \n \n 1,003 \n \n \n \n \n NCI \n \n \n   \n \n \n (13) \n \n \n (6) \n \n \n \n \n Total comprehensive income for the period attributable to ordinary shareholders \n \n \n   \n \n \n 1,259 \n \n \n 997 \n \n \n \n \n \n \n   \n Condensed consolidated balance sheet \n At 30 June 2024 \n \n \n \n \n \n \n \n \n \n \n 30 June \n 2024 \n \n \n 31 December 2023 \n \n \n \n \n \n \n \n Notes \n \n \n £m \n \n \n £m \n \n \n \n \n ASSETS \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Intangible assets \n \n \n 7 \n \n \n 4,426 \n \n \n 4,009 \n \n \n \n \n Property, plant and equipment \n \n \n 8 \n \n \n 3,637 \n \n \n 3,728 \n \n \n \n \n Right-of-use assets \n \n \n 9 \n \n \n 815 \n \n \n 905 \n \n \n \n \n Investments - joint ventures and associates \n \n \n \n \n \n 540 \n \n \n 479 \n \n \n \n \n Investments - other \n \n \n \n \n \n 4 \n \n \n 31 \n \n \n \n \n Other financial assets \n \n \n 14 \n \n \n 314 \n \n \n 360 \n \n \n \n \n Deferred tax assets \n \n \n \n \n \n 2,922 \n \n \n 2,998 \n \n \n \n \n Post-retirement scheme surpluses \n \n \n 16 \n \n \n 868 \n \n \n 782 \n \n \n \n \n Non-current assets \n \n \n \n \n \n 13,526 \n \n \n 13,292 \n \n \n \n \n Inventories \n \n \n \n \n \n 5,449 \n \n \n 4,848 \n \n \n \n \n Trade receivables and other assets \n \n \n 10 \n \n \n 8,194 \n \n \n 8,123 \n \n \n \n \n Contract assets \n \n \n 11 \n \n \n 1,364 \n \n \n 1,242 \n \n \n \n \n Taxation recoverable \n \n \n \n \n \n 56 \n \n \n 80 \n \n \n \n \n Other financial assets \n \n \n 14 \n \n \n 39 \n \n \n 34 \n \n \n \n \n Cash and cash equivalents \n \n \n \n \n \n 4,319 \n \n \n 3,784 \n \n \n \n \n Current assets \n \n \n \n \n \n 19,421 \n \n \n 18,111 \n \n \n \n \n Assets held for sale \n \n \n 19 \n \n \n 64 \n \n \n 109 \n \n \n \n \n TOTAL ASSETS \n \n \n \n \n \n 33,011 \n \n \n 31,512 \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n LIABILITIES \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Borrowings and lease liabilities \n \n \n 12 \n \n \n (305) \n \n \n (809) \n \n \n \n \n Other financial liabilities \n \n \n 14 \n \n \n (560) \n \n \n (448) \n \n \n \n \n Trade payables and other liabilities \n \n \n 13 \n \n \n (7,557) \n \n \n (6,896) \n \n \n \n \n Contract liabilities \n \n \n 11 \n \n \n (6,118) \n \n \n (6,098) \n \n \n \n \n Current tax liabilities \n \n \n \n \n \n (168) \n \n \n (143) \n \n \n \n \n Provisions for liabilities and charges \n \n \n 15 \n \n \n (556) \n \n \n (532) \n \n \n \n \n Current liabilities  \n \n \n \n \n \n (15,264) \n \n \n (14,926) \n \n \n \n \n Borrowings and lease liabilities \n \n \n 12 \n \n \n (4,845) \n \n \n (4,950) \n \n \n \n \n Other financial liabilities \n \n \n 14 \n \n \n (1,596) \n \n \n (1,983) \n \n \n \n \n Trade payables and other liabilities \n \n \n 13 \n \n \n (1,795) \n \n \n (1,927) \n \n \n \n \n Contract liabilities \n \n \n 11 \n \n \n (8,968) \n \n \n (8,438) \n \n \n \n \n Deferred tax liabilities \n \n \n \n \n \n (283) \n \n \n (330) \n \n \n \n \n Provisions for liabilities and charges \n \n \n 15 \n \n \n (1,517) \n \n \n (1,497) \n \n \n \n \n Post-retirement scheme deficits \n \n \n 16 \n \n \n (967) \n \n \n (1,035) \n \n \n \n \n Non - current liabilities  \n \n \n \n \n \n (19,971) \n \n \n (20,160) \n \n \n \n \n Liabilities associated with assets held for sale \n \n \n 19 \n \n \n (13) \n \n \n (55) \n \n \n \n \n TOTAL LIABILITIES \n \n \n \n \n \n (35,248) \n \n \n (35,141) \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n NET LIABILITIES \n \n \n   \n \n \n (2,237) \n \n \n (3,629) \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n EQUITY \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Called-up share capital \n \n \n \n \n \n 1,701 \n \n \n 1,684 \n \n \n \n \n Share premium \n \n \n \n \n \n 1,012 \n \n \n 1,012 \n \n \n \n \n Capital redemption reserve \n \n \n \n \n \n 167 \n \n \n 167 \n \n \n \n \n Cash flow hedge reserve \n \n \n \n \n \n 9 \n \n \n 12 \n \n \n \n \n Translation reserve \n \n \n \n \n \n 610 \n \n \n 634 \n \n \n \n \n Accumulated losses \n \n \n \n \n \n (5,791) \n \n \n (7,190) \n \n \n \n \n Equity attributable to ordinary shareholders \n \n \n \n \n \n (2,292) \n \n \n (3,681) \n \n \n \n \n Non-controlling interest (NCI) \n \n \n \n \n \n 55 \n \n \n 52 \n \n \n \n \n TOTAL EQUITY \n \n \n \n \n \n (2,237) \n \n \n (3,629) \n \n \n \n \n \n   \n Condensed consolidated cash flow statement \n For the half-year ended 30 June 2024 \n \n \n \n \n \n \n \n Notes \n \n \n   \n Half-year to \n30 June 2024 \n \n \n Restated 1 \n Half-year to \n30 June 2023 \n \n \n \n \n Reconciliation of cash flows from operating activities \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Operating profit \n \n \n \n \n \n 1,646 \n \n \n 797 \n \n \n \n \n Loss/(profit) on disposal of property, plant and equipment \n \n \n \n \n \n 1 \n \n \n (1) \n \n \n \n \n Share of results of joint ventures and associates \n \n \n \n \n \n (78) \n \n \n (89) \n \n \n \n \n Dividends received from joint ventures and associates \n \n \n \n \n \n 15 \n \n \n 16 \n \n \n \n \n Amortisation and impairment of intangible assets \n \n \n 7 \n \n \n (287) \n \n \n 139 \n \n \n \n \n Depreciation and impairment of property, plant and equipment \n \n \n 8 \n \n \n 205 \n \n \n 206 \n \n \n \n \n Depreciation and impairment of right-of-use assets \n \n \n 9 \n \n \n 129 \n \n \n 170 \n \n \n \n \n Adjustment of amounts payable under residual value guarantees within lease liabilities \n \n \n \n \n \n - \n \n \n (2) \n \n \n \n \n Impairment of and other movements on investments \n \n \n \n \n \n 4 \n \n \n - \n \n \n \n \n Increase/(decrease) in provisions \n \n \n \n \n \n 38 \n \n \n (142) \n \n \n \n \n Increase in inventories \n \n \n \n \n \n (641) \n \n \n (557) \n \n \n \n \n Movement in trade receivables/payables and other assets/liabilities \n \n \n \n \n \n 573 \n \n \n (51) \n \n \n \n \n Movement in contract assets/liabilities \n \n \n \n \n \n 497 \n \n \n 1,154 \n \n \n \n \n Cash flows on other financial assets and liabilities held for operating purposes 2 \n \n \n \n \n \n (410) \n \n \n (516) \n \n \n \n \n Cash flows on settlement of excess derivative contracts 1, 3 \n \n \n \n \n \n (75) \n \n \n (210) \n \n \n \n \n Interest received \n \n \n \n \n \n 124 \n \n \n 60 \n \n \n \n \n Net defined benefit post-retirement cost recognised in profit before financing \n \n \n 16 \n \n \n 21 \n \n \n 25 \n \n \n \n \n Cash funding of defined benefit post-retirement schemes \n \n \n 16 \n \n \n (39) \n \n \n (38) \n \n \n \n \n Share-based payments \n \n \n \n \n \n 59 \n \n \n 23 \n \n \n \n \n Net cash inflow from operating activities before taxation \n \n \n \n \n \n 1,782 \n \n \n 984 \n \n \n \n \n Taxation paid \n \n \n \n \n \n (113) \n \n \n (59) \n \n \n \n \n Net cash inflow from operating activities \n \n \n \n \n \n 1,669 \n \n \n 925 \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n Cash flows from investing activities \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Movement in other investments \n \n \n \n \n \n - \n \n \n 1 \n \n \n \n \n Additions of intangible assets \n \n \n 7 \n \n \n (165) \n \n \n (123) \n \n \n \n \n Disposals of intangible assets \n \n \n 7 \n \n \n - \n \n \n 1 \n \n \n \n \n Purchases of property, plant and equipment \n \n \n \n \n \n (133) \n \n \n (177) \n \n \n \n \n Disposals of property, plant and equipment \n \n \n \n \n \n 7 \n \n \n 12 \n \n \n \n \n Acquisition of businesses \n \n \n 19 \n \n \n - \n \n \n (12) \n \n \n \n \n Disposal of businesses (including cash flows on disposals in prior periods) \n \n \n 19 \n \n \n - \n \n \n 3 \n \n \n \n \n Movement in investments in joint ventures and associates \n \n \n \n \n \n (16) \n \n \n (8) \n \n \n \n \n Movement in short-term investments \n \n \n \n \n \n - \n \n \n 11 \n \n \n \n \n Cash flows on other financial assets and liabilities held for non-operating purposes \n \n \n \n \n \n (12) \n \n \n - \n \n \n \n \n Net cash outflow from investing activities \n \n \n \n \n \n (319) \n \n \n (292) \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Cash flows from financing activities \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Repayment of loans \n \n \n \n \n \n (475) \n \n \n (1) \n \n \n \n \n Settlement of swaps hedging fixed rate borrowings \n \n \n \n \n \n (11) \n \n \n - \n \n \n \n \n Proceeds from increase in loans \n \n \n \n \n \n 4 \n \n \n 1 \n \n \n \n \n Capital element of lease payments \n \n \n \n \n \n (122) \n \n \n (167) \n \n \n \n \n Net cash flow from decrease in borrowings and lease liabilities \n \n \n \n \n \n (604) \n \n \n (167) \n \n \n \n \n Interest paid \n \n \n \n \n \n (103) \n \n \n (94) \n \n \n \n \n Interest element of lease payments \n \n \n \n \n \n (42) \n \n \n (42) \n \n \n \n \n Fees paid on undrawn facilities \n \n \n \n \n \n (12) \n \n \n (23) \n \n \n \n \n Transactions with NCI 4 \n \n \n \n \n \n 33 \n \n \n 24 \n \n \n \n \n Net cash outflow from financing activities \n \n \n \n \n \n (728) \n \n \n (302) \n \n \n \n \n   \n \n \n \n \n \n   \n \n \n \n \n \n \n \n Change in cash and cash equivalents \n \n \n \n \n \n 622 \n \n \n 331 \n \n \n \n \n Cash and cash equivalents at 1 January \n \n \n \n \n \n 3,731 \n \n \n 2,605 \n \n \n \n \n Exchange losses on cash and cash equivalents \n \n \n \n \n \n (40) \n \n \n (81) \n \n \n \n \n Cash and cash equivalents at 30 June 5 \n \n \n \n \n \n 4,313 \n \n \n 2,855 \n \n \n \n \n 1   The cash flow statement to 30 June 2023 has been re-presented as a result of a change in accounting policy to disclose cash flows on settlement of excess derivative contracts as cash flows from operating activities. As a result, there has been a decrease in cash flows from operating activities during the period to 30 June 2023 from £1,135m to £925m and a decrease in cash outflow from financing activities from £(512)m to £(302)m. There is no impact to the total change in cash and cash equivalents or to any alternative performance measures. See note 1 for further detail \n 2    Predominantly relates to cash settled on derivative contracts held for operating purposes \n 3   In 2020, the Group experienced a significant decline in its medium-term outlook and consequently a significant deterioration to its forecast net USD cash inflows. The Group took action to reduce the size of the USD hedge book by $11.8bn across 2020-2026 to reflect the fact that at that time, future operating cash flows were no longer forecast to materialise. To achieve the necessary reduction in the hedge book, a separate and distinct set of foreign exchange derivative instruments were entered into to buy $11.8bn. The associated cash outflow of these transactions is £1,674m and occurs over the period 2020-2026. This action had the impact of fixing the fair value of the over-hedged position and provided certainty over when the cash flows to settle the position would occur in future periods. During the period, the Group incurred a cash outflow of £75m (30 June 2023: £210m) and estimates that future cash outflows of £71m will be incurred during the remainder of 2024 and £175m spread over 2025 and 2026 \n 4    Relates to NCI investment received in the period, in respect of Rolls-Royce SMR Limited \n 5    The Group considers overdrafts (repayable on demand) and cash held for sale to be an integral part of its cash management activities and these are included in cash and cash equivalents for the purposes of the cash flow statement \n \n \n Condensed consolidated cash flow statement continued \n For the half-year ended 30 June 2024 \n In deriving the condensed consolidated cash flow statement, movements in balance sheet line items have been adjusted for non-cash items. The cash flow in the period includes the sale of goods and services to joint ventures and associates - see note 18. \n   \n \n \n \n \n \n \n \n Half-year to 30 June 2024 \n \n \n Half-year to \n 30 June 2023 \n \n \n \n \n \n \n \n £m \n \n \n £m \n \n \n \n \n Reconciliation of movements in cash and cash equivalents to movements in net debt \n \n \n   \n \n \n \n \n \n \n \n Change in cash and cash equivalents \n \n \n 622 \n \n \n 331 \n \n \n \n \n Cash flow from decrease in borrowings and lease liabilities \n \n \n 604 \n \n \n 167 \n \n \n \n \n Less: settlement of related derivatives included in fair value of swaps below \n \n \n (11) \n \n \n - \n \n \n \n \n Cash flow from decrease in short-term investments \n \n \n - \n \n \n (11) \n \n \n \n \n Change in net debt resulting from cash flows \n \n \n 1,215 \n \n \n 487 \n \n \n \n \n Lease additions, modifications and other non-cash adjustments on borrowings and lease liabilities \n \n \n (62) \n \n \n (90) \n \n \n \n \n Exchange (losses)/gains on net debt \n \n \n (26) \n \n \n 66 \n \n \n \n \n Fair value adjustments \n \n \n 17 \n \n \n 78 \n \n \n \n \n Movement in net debt \n \n \n 1,144 \n \n \n 541 \n \n \n \n \n Net debt at 1 January excluding the fair value of swaps \n \n \n (1,975) \n \n \n (3,337) \n \n \n \n \n Net debt at 30 June excluding the fair value of swaps \n \n \n (831) \n \n \n (2,796) \n \n \n \n \n Fair value of swaps hedging fixed rate borrowings \n \n \n 9 \n \n \n (49) \n \n \n \n \n Net debt at 30 June \n \n \n (822) \n \n \n (2,845) \n \n \n \n \n The movement in net debt (defined by the Group as including the items shown below) is as follows: \n \n \n \n \n \n \n \n At \n 1 January \n \n \n Funds flow \n \n \n Exchange differences \n \n \n Fair value adjustments \n \n \n Reclassifi-cations     \n \n \n Other movements \n \n \n At \n30 June \n \n \n \n \n \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n \n \n 2024 \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n Cash at bank and in hand \n \n \n 739 \n \n \n 9 \n \n \n (6) \n \n \n - \n \n \n - \n \n \n - \n \n \n 742 \n \n \n \n \n Money market funds \n \n \n 1,077 \n \n \n 437 \n \n \n (4) \n \n \n - \n \n \n - \n \n \n - \n \n \n 1,510 \n \n \n \n \n Short-term deposits \n \n \n 1,968 \n \n \n 129 \n \n \n (30) \n \n \n - \n \n \n - \n \n \n - \n \n \n 2,067 \n \n \n \n \n Cash and cash equivalents (per balance sheet) \n \n \n 3,784 \n \n \n 575 \n \n \n (40) \n \n \n - \n \n \n - \n \n \n - \n \n \n 4,319 \n \n \n \n \n Overdrafts \n \n \n (53) \n \n \n 47 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (6) \n \n \n \n \n Cash and cash equivalents (per cash flow statement) \n \n \n 3,731 \n \n \n 622 \n \n \n (40) \n \n \n - \n \n \n - \n \n \n - \n \n \n 4,313 \n \n \n \n \n Short- term investments \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Other current borrowings \n \n \n (478) \n \n \n 471 \n \n \n - \n \n \n 2 \n \n \n - \n \n \n 1 \n \n \n (4) \n \n \n \n \n Non-current borrowings \n \n \n (3,568) \n \n \n - \n \n \n 13 \n \n \n 15 \n \n \n - \n \n \n (2) \n \n \n (3,542) \n \n \n \n \n Lease liabilities \n \n \n (1,660) \n \n \n 122 \n \n \n 1 \n \n \n - \n \n \n - \n \n \n (61) \n \n \n (1,598) \n \n \n \n \n Financial liabilities \n \n \n (5,706) \n \n \n 593 \n \n \n 14 \n \n \n 17 \n \n \n - \n \n \n (62) \n \n \n (5,144) \n \n \n \n \n Net debt excluding the fair value of swaps \n \n \n (1,975) \n \n \n 1,215 \n \n \n (26) \n \n \n 17 \n \n \n - \n \n \n (62) \n \n \n (831) \n \n \n \n \n Fair value of swaps hedging fixed rate borrowings 1 \n \n \n 23 \n \n \n 11 \n \n \n (13) \n \n \n (12) \n \n \n - \n \n \n - \n \n \n 9 \n \n \n \n \n Net debt \n \n \n (1,952) \n \n \n 1,226 \n \n \n (39) \n \n \n 5 \n \n \n - \n \n \n (62) \n \n \n (822) \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n 2023 \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n Cash at bank and in hand \n \n \n 847 \n \n \n (76) \n \n \n (27) \n \n \n - \n \n \n - \n \n \n - \n \n \n 744 \n \n \n \n \n Money market funds \n \n \n 34 \n \n \n 701 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 735 \n \n \n \n \n Short-term deposits \n \n \n 1,726 \n \n \n (290) \n \n \n (54) \n \n \n - \n \n \n - \n \n \n - \n \n \n 1,382 \n \n \n \n \n Cash and cash equivalents (per balance sheet) \n \n \n 2,607 \n \n \n 335 \n \n \n (81) \n \n \n - \n \n \n - \n \n \n - \n \n \n 2,861 \n \n \n \n \n Overdrafts \n \n \n (2) \n \n \n (4) \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (6) \n \n \n \n \n Cash and cash equivalents (per cash flow statement) \n \n \n 2,605 \n \n \n 331 \n \n \n (81) \n \n \n - \n \n \n - \n \n \n - \n \n \n 2,855 \n \n \n \n \n Short-term investments \n \n \n 11 \n \n \n (11) \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n \n \n Other current borrowings \n \n \n (1) \n \n \n - \n \n \n - \n \n \n - \n \n \n (462) \n \n \n - \n \n \n (463) \n \n \n \n \n Non-current borrowings \n \n \n (4,105) \n \n \n - \n \n \n 63 \n \n \n 78 \n \n \n 462 \n \n \n (2) \n \n \n (3,504) \n \n \n \n \n Lease liabilities \n \n \n (1,847) \n \n \n 167 \n \n \n 84 \n \n \n - \n \n \n - \n \n \n (88) \n \n \n (1,684) \n \n \n \n \n Financial liabilities \n \n \n (5,953) \n \n \n 167 \n \n \n 147 \n \n \n 78 \n \n \n - \n \n \n (90) \n \n \n (5,651) \n \n \n \n \n Net debt excluding fair value of swaps \n \n \n (3,337) \n \n \n 487 \n \n \n 66 \n \n \n 78 \n \n \n - \n \n \n (90) \n \n \n (2,796) \n \n \n \n \n Fair value of swaps hedging fixed rate borrowings 1 \n \n \n 86 \n \n \n - \n \n \n (63) \n \n \n (72) \n \n \n - \n \n \n - \n \n \n (49) \n \n \n \n \n Net debt \n \n \n (3,251) \n \n \n 487 \n \n \n 3 \n \n \n 6 \n \n \n - \n \n \n (90) \n \n \n (2,845) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n 1   Fair value of swaps hedging fixed rate borrowings reflects the impact of derivatives on repayments of the principal amount of debt. Net debt therefore includes the fair value of derivatives included in fair value hedges (30 June 2024: £33m, 31 December 2023: £34m) and the element of fair value relating to exchange differences on the underlying principal of derivatives in cash flow hedges (30 June 2024: £(24)m, 31 December 2023: £(11)m) \n   \n Condensed consolidated statement of changes in equity \n For the half-year ended 30 June 2024 \n \n \n \n \n   \n \n \n   \n \n \n Attributable to ordinary shareholders \n \n \n   \n \n \n \n \n \n \n \n Notes \n \n \n Share capital \n \n \n Share premium \n \n \n Capital redemption reserve \n \n \n Cash flow hedging reserve \n \n \n Translation reserve \n \n \n Accumulated losses 1 \n \n \n Total \n \n \n NCI \n \n \n Total equity \n \n \n \n \n \n \n \n   \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n £m \n \n \n \n \n At 1 January 2024 \n \n \n   \n \n \n 1,684 \n \n \n 1,012 \n \n \n 167 \n \n \n 12 \n \n \n 634 \n \n \n (7,190) \n \n \n (3,681) \n \n \n 52 \n \n \n (3,629) \n \n \n \n \n Profit for the period \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 1,149 \n \n \n 1,149 \n \n \n (13) \n \n \n 1,136 \n \n \n \n \n Foreign exchange translation differences on foreign operations \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (24) \n \n \n - \n \n \n (24) \n \n \n - \n \n \n (24) \n \n \n \n \n Actuarial movements on post-retirement schemes \n \n \n 16 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 124 \n \n \n 124 \n \n \n - \n \n \n 124 \n \n \n \n \n Fair value movement on cash flow hedging reserve \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n (16) \n \n \n - \n \n \n - \n \n \n (16) \n \n \n - \n \n \n (16) \n \n \n \n \n Reclassified to income statement from cash flow hedging reserve \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n 15 \n \n \n - \n \n \n - \n \n \n 15 \n \n \n - \n \n \n 15 \n \n \n \n \n Revaluation to fair value of other investments \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (3) \n \n \n (3) \n \n \n - \n \n \n (3) \n \n \n \n \n OCI of joint ventures and associates \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n (2) \n \n \n - \n \n \n (6) \n \n \n (8) \n \n \n - \n \n \n (8) \n \n \n \n \n Related tax movements \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 35 \n \n \n 35 \n \n \n - \n \n \n 35 \n \n \n \n \n Total comprehensive income/(expense) for the period \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n (3) \n \n \n (24) \n \n \n 1,299 \n \n \n 1,272 \n \n \n (13) \n \n \n 1,259 \n \n \n \n \n Issue of ordinary shares \n \n \n \n \n \n 17 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 17 \n \n \n - \n \n \n 17 \n \n \n \n \n Shares issued to employee share trust \n \n \n   \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (17) \n \n \n (17) \n \n \n - \n \n \n (17) \n \n \n \n \n Share-based payments - direct to equity 2 \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 39 \n \n \n 39 \n \n \n - \n \n \n 39 \n \n \n \n \n Transactions with NCI 3 \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 26 \n \n \n 26 \n \n \n 16 \n \n \n 42 \n \n \n \n \n Related tax movements \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 52 \n \n \n 52 \n \n \n - \n \n \n 52 \n \n \n \n \n Other changes in equity in the period \n \n \n \n \n \n 17 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 100 \n \n \n 117 \n \n \n 16 \n \n \n 133 \n \n \n \n \n At 30 June 2024 \n \n \n \n \n \n 1,701 \n \n \n 1,012 \n \n \n 167 \n \n \n 9 \n \n \n 610 \n \n \n (5,791) \n \n \n (2,292) \n \n \n 55 \n \n \n (2,237) \n \n \n \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n At 1 January 2023 \n \n \n \n \n \n 1,674 \n \n \n 1,012 \n \n \n 166 \n \n \n 26 \n \n \n 861 \n \n \n (9,789) \n \n \n (6,050) \n \n \n 34 \n \n \n (6,016) \n \n \n \n \n Profit for the period \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 1,229 \n \n \n 1,229 \n \n \n (6) \n \n \n 1,223 \n \n \n \n \n Foreign exchange translation differences on foreign operations \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (227) \n \n \n - \n \n \n (227) \n \n \n - \n \n \n (227) \n \n \n \n \n Actuarial movements on post-retirement schemes \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (35) \n \n \n (35) \n \n \n - \n \n \n (35) \n \n \n \n \n Fair value movement on cash flow hedging reserve \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n (31) \n \n \n - \n \n \n - \n \n \n (31) \n \n \n - \n \n \n (31) \n \n \n \n \n Reclassified to income statement from cash flow hedging reserve \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n 64 \n \n \n - \n \n \n - \n \n \n 64 \n \n \n - \n \n \n 64 \n \n \n \n \n Revaluation to fair value of other investments \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 1 \n \n \n 1 \n \n \n - \n \n \n 1 \n \n \n \n \n OCI of joint ventures and associates \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (1) \n \n \n (1) \n \n \n - \n \n \n (1) \n \n \n \n \n Related tax movements \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n (8) \n \n \n - \n \n \n 11 \n \n \n 3 \n \n \n - \n \n \n 3 \n \n \n \n \n Total comprehensive income/(expense) for the period \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n 25 \n \n \n (227) \n \n \n 1,205 \n \n \n 1,003 \n \n \n (6) \n \n \n 997 \n \n \n \n \n Issue of ordinary shares \n \n \n \n \n \n 10 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 10 \n \n \n - \n \n \n 10 \n \n \n \n \n Shares issued to employee share trust \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n (10) \n \n \n (10) \n \n \n -   \n \n \n (10) \n \n \n \n \n Share-based payments - direct to equity 2 \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 23 \n \n \n 23 \n \n \n \n \n \n 23 \n \n \n \n \n Transactions with NCI 3 \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 17 \n \n \n 17 \n \n \n 10 \n \n \n 27 \n \n \n \n \n Related tax movements \n \n \n \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 3 \n \n \n 3 \n \n \n \n \n \n 3 \n \n \n \n \n Other changes in equity in the period \n \n \n \n \n \n 10 \n \n \n - \n \n \n - \n \n \n - \n \n \n - \n \n \n 33 \n \n \n 43 \n \n \n 10 \n \n \n 53 \n \n \n \n \n At 30 June 2023 \n \n \n \n \n \n 1,684 \n \n \n 1,012 \n \n \n 166 \n \n \n 51 \n \n \n 634 \n \n \n (8,551) \n \n \n (5,004) \n \n \n 38 \n \n \n (4,966) \n \n \n \n \n   \n 1   At 30 June 2024, 110,852,000 ordinary shares with a net book value of £27m (30 June 2023: 54,338,132 ordinary shares with a net book value of £22m) were held for the purpose of share-based payment plans and included in accumulated losses. During the period: \n -     30,331,000 ordinary shares with a net book value of £13m (30 June 2023: 6,439,000 ordinary shares with a net book value of £15m) vested in share-based payment plans; \n -     the Company issued 88,200,000 (30 June 2023: 49,100,000) new ordinary shares to the Group's share trust for its employee share-based payment plans with a net book value of £17m (30 June 2023: £10m); and \n -     the Company acquired none (30 June 2023: none) of its ordinary shares via reinvestment of dividends received on its own shares and purchased 71,490 \n(30 June 2023: 184,336) of its ordinary shares through purchases on the London Stock Exchange \n 2    Share-based payments - direct to equity is the share-based payment charge for the period less the actual cost of vesting excluding those vesting from own shares and cash received on share-based schemes \n 3   Relates to NCI investment received in the period in respect of Rolls-Royce SMR Limited \n     \n Notes to the Condensed Consolidated Interim Financial Statements \n   \n \n 1     Basis of preparation and accounting policies \n \n Reporting entity \n Rolls-Royce Holdings plc (the 'Company') is a public company limited by shares incorporated under the Companies Act 2006 and domiciled in the UK. These Condensed Consolidated Interim Financial Statements of the Company as at and for the six months to 30 June 2024 consist of the consolidation of the financial statements of the Company and its subsidiaries (together referred to as the 'Group') and include the Group's interest in jointly controlled and associated entities. \n The Consolidated Financial Statements of the Group as at and for the year ended 31 December 2023 (2023 Annual Report) are available upon request from the Company Secretary, Rolls-Royce Holdings plc, Kings Place, 90 York Way, London, N1 9FX.  \n The Board of Directors approved the Condensed Consolidated Interim Financial Statements on 1 August 2024. \n Statement of compliance \n These Condensed Consolidated Interim Financial Statements have been prepared on the basis of the policies set out in the 2023 Annual Report, except for changes below, and in accordance with UK adopted IAS 34 Interim Financial Reporting and the Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority. They do not include all of the information required for full annual statements and should be read in conjunction with the 2023 Annual Report. \n The interim figures up to 30 June 2024 and 2023 are unaudited. The 2023 Financial Statements, which were prepared in accordance with UK adopted International Accounting Standards (IAS) and interpretations issued by the IFRS interpretations Committee applicable to companies reporting under UK adopted IAS, have been reported on by the Group's auditors and delivered to the registrar of companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. \n Revisions to IFRS applicable in 2024 \n Supplier Finance Arrangements \n New disclosure requirements resulting from amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments relating to Supplier Finance Arrangements (SFAs) were effective from 1 January 2024. The objective of the new amendments is to provide enhanced information about SFAs that enables investors to assess the effects on an entity's liabilities, cash flows and its exposure to liquidity risk. \n The Group's suppliers have access to a supply chain financing (SCF) programme that is considered to be within the scope of the Standard's SFA definition. The new prescriptive disclosure requirements will necessitate some additional information being disclosed within the 2024 Annual Report in relation to the value of trade payables that were within the scope of the Group offered SCF scheme. This will be presented alongside the value of received payments which suppliers had drawn, this being information which the Group already discloses in its Annual Report. The Group has taken the available reliefs not to provide the additional information in these Condensed Consolidated Interim Financial Statements. \n Other \n There are no other new standards or interpretations issued by the IASB that had a significant impact on these Condensed Consolidated Interim Financial Statements. \n Change in accounting policy \n When preparing the 2023 Annual Report the Directors revised the classification of cash flows related to cash payments deferred in connection with the Group's action taken in 2020 to reduce the size of the USD hedge book by $11.8bn across 2020 to 2026. The Directors reassessed their judgement in line with IAS 7 Statement of Cash Flows and concluded that it would be more appropriate to classify these cash flows as cash flows from operating activities rather than as cash flows from financing activities. \n Consistent with the above, cash flows from operating activities during the period to 30 June 2023 have reduced by £(210)m to £925m with a corresponding decrease in cash outflow from financing activities from £(512)m to £(302)m. There is no impact to the total change in cash and cash equivalents or to any alternative performance measures. \n The above change resulted from a review which was prompted by an enquiry arising from a review of the Group's 2022 Annual Report and Accounts by the Corporate Reporting Review team of the Financial Reporting Council (FRC). The FRC review was part of a regular review and assessment of the quality of corporate reporting in the UK undertaken by the FRC. Further information regarding the review of the Group's 2022 Annual Report and Accounts is set out in the Audit Committee report in the 2023 Annual Report. The Group agreed to make the above change within its 2023 Annual Report and Accounts. The FRC review was limited to the published 2022 Annual Report; it did not benefit from a detailed understanding of underlying transactions and provides no assurance that the 2022 Annual Report is correct in all material respects. \n \n \n 1     Basis of preparation and accounting policies continued \n \n Revisions to IFRS not applicable to 2024 \n IFRS 18 \n The IASB (International Accounting Standards Board) issued a new Standard, IFRS 18 Presentation and Disclosure in Financial Statements , on 9 April 2024 that will replace IAS 1 Presentation of Financial Statements . The purpose of the new standard is to provide more consistent presentation of financial information across preparers as it is acknowledged that existing standards have given flexibility to present information in different ways. IFRS 18 will not impact the recognition or measurement of items in the financial statements. Many of the existing presentation principles in IAS 1 are retained, but there are some more specific requirements that will require the Group to make some changes in its future Annual Report and Interim Financial Statements. \n The new Standard is not yet endorsed by the UK Endorsement Board 'UKEB' but is expected to be applicable for reporting periods beginning on or after 1 January 2027. Comparative information for 2026 will need to be restated when the 2027 Interim Financial Statements and Annual Report and Accounts are published and early adoption is expected to be permitted. \n The Group has started an initial review of the Standard and expects changes to the presentation of the income statement and the Group's reported operating profit (driven by required changes such as moving 'Share of results of joint ventures and associates' into a new investing category which will no longer form part of operating profit in the Statutory Consolidated Income Statement). The process of assessing the financial impact on the Consolidated Financial Statements will continue during 2024 and 2025. \n Other \n Standards and interpretations issued by the IASB are only applicable if endorsed by the UK. The Group does not consider that any other standards, amendments or interpretations issued by the IASB, but not yet applicable will have a significant impact on the Condensed Consolidated Interim Financial Statements. \n Post balance sheet events \n The Group has taken the latest legal position in relation to any ongoing legal proceedings and reflected these in the 30 June 2024 results as appropriate. \n On 31 July 2024 the Group completed the disposal of part of Power Systems' lower power range off-highway engines business to Deutz AG as set out in note 19. Disposal proceeds are in excess of the carrying value of the assets and liabilities. \n Climate change \n In preparing the Condensed Consolidated Interim Financial Statements, the Directors have continued to consider the impact of climate change, particularly in the context of the disclosures made in the Strategic Report within the 2023 Annual Report and the stated sustainability approach. The following specific points were considered: \n -     The Group continues to decarbonise its operations, facilities and business activities through continued investment in onsite renewable energy installations; the procurement of renewable energy; and continued investment in energy efficiency improvements. An estimate of the investment required to meet scope 1 and 2 emission improvements is included in the forecasts that support these Condensed Consolidated Financial Statements; \n -     The Group is enabling its customers to operate their products in a way that is compatible with low or net zero carbon emissions and has demonstrated that all the commercial aero engines it produces, and the most popular reciprocating engines are compatible for use on sustainable fuels; \n -     The Group has invested in delivering new products and solutions that can accelerate the global energy transition, including in battery energy storage solutions in Power Systems, and in small modular reactors (SMRs); and \n -     The Group is responding to the climate challenge by creating the necessary enabling environment to advocate for the necessary policy and economic support we have identified. \n In this context the Directors have assessed the impact of climate change on a number of estimates, including those identified as being key sources of estimation uncertainty within the financial statements such as: \n -     Civil Aerospace LTSA revenues; \n -     The estimates of future cash flows considered for trigger assessments or used in impairment assessments for non-financial asset impairments; and \n -     Estimates of suitable taxable profits that will arise in the UK to utilise the deferred tax assets recognised. \n When making these assessments the Directors include consideration of the risks associated with changing customer demand, changes in investment requirements, and changes in costs due to carbon pricing and commodity price changes. As details of what specific future intervention measures will be taken by governments are not yet available, carbon pricing has been used to quantify the potential impact of future policy changes on the Group. The approach is consistent with that disclosed in note 1 in the 2023 Annual Report. \n There have been no significant changes to assumptions, including the potential impact of carbon prices on the Group's cost base, since the year ended 31 December 2023. Hence, these considerations did not have a material impact on financial reporting key judgements and estimates in the period and the Group's assessment remains that climate change is not expected to have a significant impact on the Group's current going concern assessment nor on the viability of the Group over the next five years. \n   \n \n 1     Basis of preparation and accounting policies continued \n \n Going concern \n Overview \n In adopting the going concern basis for preparing these condensed consolidated financial statements, the Directors have undertaken a review of the Group's cash flow forecasts and available liquidity, along with consideration of the principal risks and uncertainties through to December 2025 (the 'going concern period'). The processes for identifying and managing risk are described in the Group's 2023 Annual Report on pages 50 to 55. As described on those pages, the risk management process and the going concern statement are designed to provide reasonable but not absolute assurance. \n Forecasts \n Recognising the challenges of reliably estimating and forecasting the impact of external factors on the Group, the Directors have reviewed the financial forecasts and liquidity forecasts with consideration given to the potential impact of severe but plausible risks. Two forecasts have been modelled in the assessment of going concern, along with a likelihood assessment of these forecasts. The base case forecast reflects the Directors current expectations of future trading over the going concern period. A downside forecast has also been modelled which envisages severe but plausible downside risks. \n The Group's base case forecast reflects the Directors best estimation of how the business plans to perform over the going concern period. Macro-economic assumptions have been modelled using externally available data based on the most likely forecasts, considering all the markets in which we operate, with general inflation at 2% - 3%, wage inflation at 3% - 5%, interest rates at 3% - 4% and GDP growth at around 2% - 3%. In the base case forecast Civil large engine EFHs exceed 2019 levels in 2024. \n In modelling the impact of severe but plausible risks the Directors have considered the current macro-economic climate and the possibility that demand could be suppressed in the near term as a result of a Global economic downturn, reflecting slower GDP growth in this forecast when compared with the base case. EFHs have been modelled to remain consistent with average second quarter 2024 levels throughout the going concern period. Ongoing supply chain challenges have been modelled through lower spare engine sales. The model also assumes a more pessimistic view of general inflation at around 1% - 2% higher than the base case covering a broad range of costs including energy, commodities, and jet fuel. Wage inflation is modelled at 1% - 5% higher (being GDP market specific) than the base case and interest rates 1% - 2% higher. \n In preparing the condensed consolidated interim financial statements, the Directors have continued to consider the impact of climate change, particularly in the context of disclosures made in the Strategic Report in the 2023 Annual Report. Consistent with the assessment in the 2023 Annual Report, climate change is not expected to have a significant impact on the Group over the going concern period. More detail can be found on page 18 of these condensed consolidated financial statements.  \n Liquidity and borrowings \n During the period to 30 June 2024 the Group repaid a €550m (£484m) bond at its maturity in May 2024 and at the same time elected to cancel its undrawn £1bn UKEF-supported bank loan facility which was due to expire in 2027. \n At 30 June 2024, the Group had liquidity of £6.8bn including cash and cash equivalents of £4.3bn and undrawn facilities of £2.5bn. \n The Group's committed borrowing facilities at 30 June 2024 and 31 December 2025 are set out below. None of the facilities are subject to any financial covenants or rating triggers which could accelerate repayment. \n \n \n \n \n £m \n \n \n 30 June 2024 \n \n \n 31 December 2025 \n \n \n \n \n \n \n Issued bond notes 1 \n \n \n 3,511 \n \n \n 2,853 \n \n \n \n \n Revolving credit facility (undrawn) 2 \n \n \n 2,500 \n \n \n 2,500 \n \n \n \n \n Total committed borrowing facilities \n \n \n 6,011 \n \n \n 5,353 \n \n \n \n \n 1 The value of issued bond notes reflects the impact of derivatives on repayments of the principal amount of debt. The bonds mature by May 2028 \n 2 The £2,500m Revolving Credit Facility matures in November 2026 (currently undrawn) with two subsequent one year extension options \n Taking into account the maturity of these borrowing facilities, the Group has committed facilities of at least £5.4bn available throughout the going concern period. \n Conclusion \n After reviewing the current liquidity position and the cash flow forecasts modelled under both the base case and downside forecast, the Directors consider that the Group has sufficient liquidity to continue in operational existence for a period of at least 12 months from the date of this report and are therefore satisfied that it is appropriate to adopt the going concern basis of accounting in preparing the financial statements. \n \n \n 1     Basis of preparation and accounting policies continued \n \n Key areas of judgement and sources of estimation uncertainty \n The determination of the Group's accounting policies requires judgement. The subsequent application of these policies requires estimates and the actual outcome may differ from that calculated. The key areas of judgement and sources of estimation uncertainty as at 31 December 2023, that were assessed as having a significant risk of causing material adjustments to the carrying amount of assets and liabilities, are set out in \nnote 1 to the Consolidated Financial Statements in the 2023 Annual Report and are summarised below. During the period, the Group has \nre-assessed these and where necessary updated the key judgements and estimation uncertainties. Sensitivities for key sources of estimation uncertainty are disclosed where this is appropriate and practical. \n \n \n \n \n Area \n \n \n Key judgements \n \n \n Key sources of estimation uncertainty \n \n \n Sensitivities performed \n \n \n \n \n \n \n Revenue recognition and contract assets and liabilities \n \n \n Whether Civil Aerospace OE and aftermarket contracts should be combined. \n How performance on long-term aftermarket contracts should be measured. \n Whether long-term aftermarket contracts contain a significant financing component. \n Whether any costs should be treated as wastage. \n Whether the Civil Aerospace LTSA contracts are warranty style contacts entered into in connection with OE sales and therefore can be accounted for under IFRS 15. \n Whether sales of spare engines to joint ventures are at fair value. \n When revenue should be recognised in relation to spare engine sales. \n   \n \n \n Estimates of future revenue, including customer pricing, and costs of long-term contractual arrangements, including the impact of climate change. \n \n \n Based upon the stage of completion of all large engine LTSA contracts within Civil Aerospace as at 30 June 2024, the following changes in estimate would result in catch-up adjustments being recognised in the period in which the estimates change (at underlying FX rates): \n -  A change in forecast EFHs of 1% over the remaining term of the contracts would impact LTSA income and to a lesser extent costs, resulting in an impact of around £20m. \n -  A 2% increase or decrease in our pricing to customers over the life of the contracts would lead to a revenue \ncatch-up adjustment in the next 12 months of around £280m. \n -  A 2% increase or decrease in LTSA costs over the life of the contracts would lead to a revenue catch-up adjustment in the next 12 months of around \n£80m. \n   \n \n \n \n \n Risk and revenue sharing arrangements (RRSAs) \n   \n \n \n Determination of the nature of entry fees received. \n \n \n \n \n \n \n \n \n \n \n Taxation \n \n \n \n \n \n Estimates necessary to assess whether it is probable that sufficient suitable taxable profits will arise in the UK to utilise the deferred tax assets recognised. \n \n \n A 5% change in margin or shop visits (which could be driven by fewer EFHs as a result of climate change) would result in an increase/decrease in the deferred tax asset in respect of UK losses of around £90m. \n If only 90% of assumed future cost increases from climate change are passed on to customers, this would result in a decrease in the deferred tax asset of around £10m, and if the potential impact of carbon prices on the Group's cost base was to double, the recoverable value of deferred tax assets would decrease by around £50m. \n   \n \n \n \n \n Research and development \n \n \n Determination of the point in time where costs incurred on an internal programme development meet the criteria for capitalisation. \n Determination of the basis for amortising capitalised development costs. \n   \n \n \n \n \n \n \n \n \n \n \n Leases \n \n \n Determination of the lease term. \n   \n \n \n \n \n \n \n \n \n \n \n Impairment of non-current assets \n \n \n Determination of cash-generating units for assessing impairment of goodwill. \n Whether there are indicators of potential reversal of previous impairments of programme-related intangible assets. \n \n \n \n \n \n \n \n \n \n \n Provisions \n \n \n Whether any costs should be treated as wastage. \n Whether the criteria to recognise a transformation and restructuring provisions have been met. \n \n \n Estimates of the time and cost to incorporate required modified parts into the fleet to resolve technical issues on certain programmes (which could be exacerbated by prolonged supply chain challenges) and the implications of this on forecast future costs when assessing onerous contracts. \n \n \n A six-month delay in the availability of required modified parts due to supply chain challenges and disruption to throughput of engine overhauls could lead to around a £30-50m charge. \n \n \n \n \n \n \n \n \n \n \n Estimates of the future revenues and costs to fulfil onerous contracts. \n \n \n An increase in Civil Aerospace large engines estimates of LTSA costs of 1% over the remaining term of the contracts could lead to a £40-60m increase in the provision for contract losses across all programmes. \n \n \n \n \n \n \n \n \n \n \n Assumptions implicit within the calculation of discount rates. \n \n \n A 1% change in the discount rates used could lead to around a £40-60m change in the onerous contract provision. \n   \n \n \n \n \n Post-retirement benefits \n \n \n \n \n \n Estimates of the assumptions for valuing the net defined benefit obligation. \n   \n \n \n A reduction in the discount rate of 0.25% from 5.15% could lead to an increase in the defined benefit obligations of the RR UK Pension Fund (RRUKPF) of approximately £160m. This would be expected to be broadly offset by changes in the value of scheme assets, as the scheme's investment policies are designed to mitigate this risk. \n An increase in the assumed rate of inflation of 0.25% (RPI of 3.45% and CPI of 3.00%) could lead to an increase in the defined benefit obligations of the RRUKPF of approximately £60m. \n A one-year increase in life expectancy from 20.8 years (male aged 65) and from 21.5 years (male aged 45) would increase the defined benefit obligations of the RRUKPF by approximately £145m. \n   \n \n \n \n \n   \n \n 2     Segmental analysis \n \n The analysis by segment is presented in accordance with IFRS 8 Operating Segments , on the basis of those segments whose operating results are regularly reviewed by the Board (who acts as the Chief Operating Decision Maker as defined by IFRS 8). The Group's four divisions are set out below. \n \n \n \n \n Civil Aerospace \n \n \n -   development, manufacture, marketing and sales of commercial aero engines and aftermarket services \n \n \n \n \n Defence \n \n \n -   development, manufacture, marketing and sales of military aero engines, naval engines, submarine nuclear power plants and aftermarket services \n \n \n \n \n Power Systems \n \n \n -   development, manufacture, marketing and sales of integrated solutions for onsite power and propulsion \n \n \n \n \n New Markets \n \n \n -   development, manufacture and sales of small modular reactor (SMR) and new electrical power solutions \n \n \n \n \n Other businesses include the trading results of the UK Civil Nuclear business. \n Underlying results  \n The Group presents the financial performance of the divisions in accordance with IFRS 8 and consistently with the basis on which performance is communicated to the Board each month. \n Underlying results are presented by recording all relevant revenue and cost of sales transactions at the ...

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