A Global Business. Bernstein Strategic Decisions Conference. Andrew Shilston - CFO

Transcription

1 A Global Business Bernstein Strategic Decisions Conference Andrew Shilston - CFO

2 Agenda Strategic overview Sector update Operations update Summary and outlook

3 Addressing four global markets

4 Investing in technology, capability and infrastructure

5 Broadening our portfolio

6 A broadly based business - Non-civil becoming more material 150% Group Sales 5.5% CAGR 50% 100% Non Civil 45% Civil 55% 50%

7 60 50 bn 40 Rolls-Royce order book Europe Americas Asia/Middle East H1 0 Firm and announced

8 Sector Update

9 Technology creates opportunities Civil Trent XWB addressing a market opportunity of $186bn over next 20 years, with orders taken for over 700 engines. BR725 selected for the G650, addressing a sector worth $14bn over the next 20 years.

10 Installed Engine Fleet by Thrust %) Unit: Lbs Million Thrust Expected to grow at 7% CAGR to Installed thrust up 45% since 2001 C&RA V RB211 Trent

11 Parked aircraft announcements (since 3/08) PW GE R-R Classic MD80 EMB135 CRJ 737 NG A300 A320 fam CRJ700 EMB MD90 DC10 MD11 A F100 Updated 4 Sept

12 Technology creates opportunities Defence AE2100 for the C130J AE1107C for the V22 Osprey AE2100 for the C27J AE3007 on the Global Hawk Strong demand in the military transport sector(15% CAGR). AE common core powering seven applications across transport, business jets and UAV s. Significant opportunity in long-term: A400M, JSF, FSTA.

13 Technology creates opportunities - Marine Commercial O&G investment driving demand for support vessels Number of support vessels worldwide will double in a decade Global trade supporting merchant growth Submarines Exclusive provider of nuclear steam raising plant to UK RN Long-term visibility Nuclear capability creates options for Energy expansion Surface - Naval Supporting 70 navies around the world MT30 creating new positions with US Navy

14 Technology creates opportunities - Energy Nuclear 2000 employees in UK, France and US Targeting UK new build Global opportunities Tidal Power Equity stake in TGL Deep water trials Q Fuel Cells 100 hour test planned H2 2008

15 Operations update

16 Investing to deliver productivity and growth Targeted investment to deliver capacity UK facility programme making good progress Singapore and USA. Expanding international footprint of our own operations Low cost environments. Continued dollarisation. Good progress on restructuring support functions 80% complete in H1 complete in Self funding in Developing a more flexible and capable cost base.

17 Managing the challenges Supply chain improving but still challenged in some areas. Programme delays contribute to the challenges Managing operational base and costs. Additional stresses on inventory levels. Unit costs up 2% ~ 4% in 2008.

18 Operations summary Increasingly global footprint will drive long term improvements. Managing the effects of increasing costs and programme delays. Good progress in H1 despite ongoing challenges. Restructuring of support functions going well and will deliver benefits this year. Significant further load growth over the near term. Developing a more flexible and capable cost base.

19 Agenda Strategic overview Sector update Operations update Summary and outlook

20 Growth in a challenging environment A high technology power systems company, with a broad portfolio, geographically diverse customer base and order book. Consistent focus on cost reduction and performance improvement. Civil portfolio mitigates aviation sector challenges. Non-civil businesses growing and increasingly material. For 2008 continuing growth in underlying profits and positive cash generation.

21 SAFE HARBOUR STATEMENT Rolls-Royce Group plc (the Group ) is providing the following cautionary statement. This document contains certain statements that are or may be forward-looking with respect to the financial condition, results or operations and business of the Group. These statements are sometimes, but not always, identified by the words may, anticipates, believes, expects or estimates. By their nature forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to (i) changes to the current outlook for global power systems markets, (ii) changes in tax laws and regulations, (iii) the risks associated with the introduction of new products and services, (iv) significant global disturbances such as terrorism or prolonged healthcare concerns, (v) the termination or delay of key contracts and (vi) long-term fluctuations in exchange rates, (vii) regulatory and shareholder approvals, (viii) unanticipated liabilities and (ix) actions of competitors. Subject to the Listing Rules of the UK Listing Authority, Rolls-Royce Group plc assumes no responsibility to update any of the forward looking statements herein.

22 Appendix

23 Rolls-Royce Order book bn Sales bn Employees % Aftermarket Aftermarket sales bn Net cash m (300) 18 (501) 888

24 Balanced business portfolio 2008 H1 Total sales: 4.2bn Aftermarket services: 53% 2.2 bn Energy: 4% Marine: 16% Defence: 8% Civil: 19% Original equipment: 47% 2.0bn

25 Foreign exchange management Forward cover of $9.1bn with an average rate ~$1.87 Opening spot rate ~$1.99 Average spot rate ~$1.97 Closing spot rate ~$1.99 Hedging policy offers visibility of ~$ rate allowing planned transition Managing exposure through Utilisation of hedge book Dollarisation of supply chain Cost reduction

26 The broadest civil product range

27 Civil Aerospace 2008 m Sales * Profit * m m 2007 m Order Book bn bn 2,102 2, Strong progress across all programmes. Flying hours up 4% in H1; Services revenues up 10%. 16m customer charge in H1. Continuing cost and FX headwinds. Strong OE growth in H2 led by deliveries for widebody. *Underlying sales and profit before financing costs

28 A competitive portfolio Defence Aerospace

29 Defence Aerospace 2008 m Sales * Profit * m m 2007 m Order Book bn bn Strong positions on major programmes~growing order book. Improvement in sales in second half. Phasing of restructuring charges and R&D held back first half. Well balanced business development, production and services. * Underlying sales and profit before financing costs

30 The widest range of marine products and services from a single supplier

31 Integrated systems capability Scope of supply Automation & control Ship design Deck machinery Motion control Propulsion systems Engines

32 Marine 2008 m Sales * Profit * m m 2007 m Order Book bn bn 1, Increasingly broad portfolio Extending capability through the acquisition of SHE. Strong market positions in naval and commercial. Investing in increased capacity. Strong first half trading performance with positive outlook. * Underlying sales and profit before financing costs

33 Energy Portfolio Oil & Gas production Civil Nuclear (onshore and offshore) Oil and Gas production Oil transmission Gas gathering Secondary oil/gas recovery Gas transmission Gas pipelines Gas storage 50 years experience with the UK RN Submarine fleet Integrated design, supply and services Instrumentation and control for all French reactors World class expertise Tidal Power Leveraging marine experience and capabilities Investing in tidal demonstrator Offshore trials in Q Power Generation Industrial Commercial Municipal 501s and RB211s provide 4-32 MW of power Trent 60 provides up to 58 MW of power Developing a 1MW Fuel Cell

34 Energy Fuel cells 2008 m Sales * Profit * m m 2007 m Order Book bn bn (8) (1) Benefiting from increased O&G activity. Power Generation making good progress Record order intake for industrial Trent. Further fuel cells tests planned. H1 trading held back by restructuring and one-off 18m technology fees in H * Underlying sales and profit before financing costs