BETTER BUSINESSES POWER FOR OUR A CHANGING PRIORITIES WORLD - - PowerPoint PPT Presentation

BETTER POWER FOR A CHANGING WORLD

WHO WE ARE OUR BUSINESSES OUR PRIORITIES

WHO WE ARE

WE ARE A POWER SYSTEMS AND SERVICES GROUP

ORDER BOOK

£74

bn

REVENUE

£14.6bn

LAND SEA AIR

PROFIT

£1.6bn

Trent XWB In service on the A350. Over 1,500 engines on order.

BETTER POWER

• Cleaner and more

sustainable energy

• More fuel-effjcient

systems on land, at sea and in the air

• Helping customers

to do more using less

LEADING INNOVATION A CHANGING WORLD

• Growing population and

global growth creating demand for more power

• Greater affmuence leading

to greater mobility

• Climate change driving

demand for lower emissions

LEADING TECHNOLOGY MTU POWERPACKS

Among the most advanced in the rail industry, meeting all the latest EU regulations on emissions

TRENT XWB

World’s most efficient large aero engine

UT DESIGN SERIES

Global benchmark for offshore

• il industry: wave-piercing hull

to improve efficiency and reduce fuel consumption

OUR VISION IS TO DELIVER BETTER POWER FOR A CHANGING WORLD

BETTER POWER FOR A CHANGING WORLD

£1.2 BILLION

invested in research and development annually

15,500

engineers

MORE PA TENTS

filed annually than any

• ther UK company

31

university technology partnerships

HOW WE ARE STRUCTURED

CUSTOMER SERVICES DEFENCE AEROSPACE MARINE POWER SYSTEMS NUCLEAR CIVIL AEROSPACE

LAND & SEA AEROSPACE

NUCLEAR RECIPROCATING ENGINES GAS TURBINES

COMPLEMENTARY TECHNOLOGIES AND BUSINESS CYCLES

LAND & SEA AEROSPACE

RECIPROCATING ENGINES LARGE & GLOBAL MEDIUM/HIGH LOW/MEDIUM 2-8 YEARS 20+ YEARS GROWING NUCLEAR GLOBAL HIGH LOW/MEDIUM 20 YEARS 40+ YEARS GROWING GAS TURBINES LARGE & GLOBAL HIGH HIGH 5-20 YEARS 40+ YEARS SUBSTANTIAL AND GROWING

POWER SOURCE CUSTOMER BASE BARRIERS TO ENTRY INVESTMENT REQUIRED DEVELOPMENT TIME PRODUCT LIFE SERVICE OPPORTUNITY

BENEFITS OF A BALANCED PORTFOLIO

COMMERCIAL

Different business and investment cycles support strong balance sheet Scale provides resilience and helps to fund R&D Breadth increases market access

INDUSTRIAL

High technology and advanced engineering applied across the Group Deep understanding of materials, electronics, data management and services Whole systems integration

STRATEGIC

Address attractive, long-term markets where growth is driven by increasing population, affmuence and trade Rising environmental standards and demanding operating conditions play to our strengths We invest with confjdence because of

• ur deep understanding of customer

requirements

A ROBUST AND LONG-TERM GROWTH BUSINESS

Aerospace Land & Sea

2004: £5.9bn 2014: £14.6bn

REVENUE PROFIT

2004: £0.4bn 2014: £1.6bn 89%

25% 75%

10%

CAGR

16%

CAGR

64% 36%

75% 28%

BALANCED REVENUE STREAMS

48% 52% ORIGINAL

EQUIPMENT CUSTOMER SERVICES 25% 11% 36% 25%

LAND & SEA

POWER SYSTEMS MARINE NUCLEAR DEFENCE AEROSPACE CIVIL AEROSPACE

AEROSPACE

OUR BUSINESSES

OVERVIEW

• 13,000 engines in service

powering 35 aircraft types

• Leading engine supplier

in widebody aircraft and large corporate jet markets

• Trent engine on most

major new twin-aisle aircraft programmes

GROWTH DRIVERS

• Continuous investment

in applied R&D allows us to maintain strong market position

• Requirement for quieter,

more fuel-effjcient engines which reduce emissions

• Increasing demand for

travel in emerging markets and requirement for more fuel-effjcient aircraft

MARKET OUTLOOK

• Global market for

equipment and services estimated at $1,900 billion

• ver next 20 years
• Growth in engine

deliveries drives $650 billion services market

• ver next 20 years
• More than 90% of Trent

engines covered by long- term service agreements

REVENUE

£6,837m

PROFIT

£942m CIVIL AEROSPACE

Advance and UltraFan Our civil aero engine designs of the future will incorporate new CTi carbon and titanium fan blades to deliver significant weight savings.

54%

REVENUE BY MARKET

39% 61%

Large engines Small & medium engines REVENUE MIX Original Equipment Customer Services

48% 52%

OVERVIEW

• World’s second largest

supplier of defence aero engines

• Presence in all major

sectors – transport, combat, trainer, helicopters and unmanned aerial vehicles (UAVs)

• 16,000 engines in

service with more than 160 military customers in over 100 countries

GROWTH DRIVERS

• Long-term requirement

for global security

• Leading position in

military transport aircraft

• Requirement for

innovative solutions to customer service needs

MARKET OUTLOOK

• Equipment market

worth up to $150 billion

• ver next 20 years
• Services market

worth up to $250 billion

• ver next 20 years
• Customer demand

for greater capability will drive growth in services

DEFENCE AEROSPACE

Vertical technology Our LiftSystem for the STOVL version

• f the F-35 Joint Strike Fighter delivers

40,000 lbs of downward thrust. REVENUE

£2,069m

PROFIT

£366m

REVENUE BY MARKET REVENUE MIX Original Equipment & Development Customer Services

61% 39% 10% 39% 51%

Transport Combat UAV/Trainer

POWER SYSTEMS

OVERVIEW

• World leader in fuel-

effjcient, high-speed diesel technology

• Specialises in

reciprocating engines for land and sea power applications

• 800,000 power systems

in service across marine, industrial, rail, defence,

• ff-road and energy

markets

GROWTH DRIVERS

• Major growth potential

in fuel-effjcient engines for marine and power markets

• Opportunities for

technology transfer and collaboration with Marine business

• Revenue growth

supported by extensive distribution network and broad market presence

MARKET OUTLOOK

• Total market for

reciprocating engines estimated at £500 billion

• ver next 20 years
• Scope to increase service

revenues from customer care agreements

• Services market worth

up to £150 billion over next 20 years

Piston power Our MTU product range is a world-leader in diesel and gas engines for land and sea applications. REVENUE

£2,720m

PROFIT

£253m

REVENUE BY MARKET REVENUE MIX Original Equipment Customer Services

30% 70% 13% 39%

Marine Industrial Energy Defence/other

20% 28%

MARINE

OVERVIEW

• 4,000 customers

worldwide with equipment installed

• n 25,000 vessels
• Strength in three key

markets – naval, merchant and offshore

• World’s largest portfolio
• f power, propulsion,

complex positioning systems and deck equipment

GROWTH DRIVERS

• Long-term requirement

for marine support to

• ffshore oil and gas

markets

• Environmental legislation

creating need for cleaner power technologies

• Vessel owners benefjt

from one supplier of engine, propulsion and equipment systems from bridge to stern

MARKET OUTLOOK

• Equipment market

worth up to £170 billion

• ver next 20 years
• Services market

worth up to £80 billion

• ver next 20 years
• Opportunities created by

growing but fragmented global market

Carrier capability The 33-tonne propellers that will power the Royal Navy’s new Queen Elizabeth class aircraft carriers. REVENUE

£1,709m

PROFIT

£138m

REVENUE BY MARKET REVENUE MIX Original Equipment Customer Services

37% 63% 22% 19% 59%

Offshore Naval Merchant

NUCLEAR

OVERVIEW

• More than 50 years’

experience in nuclear industry through UK submarine programme

• Around half the world’s

civil nuclear reactors use

• ur services or solutions
• Strong global position in

nuclear instrumentation and control systems

GROWTH DRIVERS

• Security of supply,

environmental requirements and rising demand drive need for nuclear as part of energy mix

• Strategic relationships

with range of reactor designers gives us broad customer spread across the world

• Decommissioning
• ffers long-term growth

market potential

MARKET OUTLOOK

• Long-term UK MoD

submarine programme provides stable, ongoing service revenue stream

• Civil nuclear equipment

and services market worth £220 billion over next 20 years

• Reactor support services

market potentially valued at £140 billion over 20 years

Nuclear heritage Skills and knowledge developed over the past 50 years providing nuclear propulsion for the Royal Navy’s submarine fleet are being applied to the growing global market for civil nuclear power. REVENUE

£684m

PROFIT

£48m

REVENUE BY MARKET REVENUE MIX Original Equipment Customer Services

63% 37% 74%

Submarines Civil nuclear/other Power generation

20% 6 %

ADDING VALUE FOR CUSTOMERS AND SHAREHOLDERS

We leverage data to improve service experience, reduce cost and drive innovation Provides long-term visibility of income

GROUP REVENUE MIX TOTAL SERVICES REVENUE: £7

bn

SERVICES REVENUE BY DIVISION

52%

ORIGINAL EQUIPMENT

48%

SERVICES

72%

AEROSPACE

28% LAND

& SEA

IMPORTANCE OF CUSTOMER SERVICES ACROSS THE GROUP

GROWING INSTALLED ENGINE BASE

Drives service revenues Provides growth opportunity across the Group

CAPTURING THE OPPORTUNITY

Long-term service agreements aligns interests and deepens our connection with customers We invest in service capability to meet their needs

OUR PRIORITIES

STRATEGIC INVESTMENT

WIDEBODY AIRCRAFT NARROWBODY AIRCRAFT MEDIUM-SPEED RECIPROCATING ENGINES CHANGE OUR CULTURE THE 4Cs

CUSTOMER CONCENTRATION COST CASH

FIX THE BASICS

CHANGE OUR CULTURE THE 4Cs

CUSTOMER CONCENTRATION COST CASH

FIX THE BASICS

CUSTOMER

Place the customer at the heart of our business

CONCENTRATION

Focus on where we add value

COST

Ensure our costs are competitive

CASH

For shareholder returns and to invest in future growth

FIX THE BASICS THE 4Cs

CHANGE OUR CULTURE THE 4Cs

CUSTOMER CONCENTRATION COST CASH

FIX THE BASICS

FIX THE BASICS CHANGE OUR CULTURE

Customer requirements driving innovation Lean philosophy creating value for our customers High Performance Culture enabling employees to be at their best Strong ethics guiding standards and behaviours

WIDEBODY AIRCRAFT

Defend and build market share

NARROWBODY AIRCRAFT

Re-enter single aisle market

RECIPROCATING ENGINES

Grow capability in medium-speed market

STRATEGIC INVESTMENT

WIDEBODY AIRCRAFT NARROWBODY AIRCRAFT MEDIUM-SPEED RECIPROCATING ENGINES

OUR PRIORITIES STRATEGIC INVESTMENT

20-YEAR GROWTH IN WIDEBODY FLEET STRONG MARKET GROWTH DRIVEN BY CUSTOMER DEMAND

• Rolls-Royce has more than 50%

share of engines on order for new widebody aircraft

• Shift to modern fuel-effjcient models
• Increasing travel in emerging markets

RISING OUTPUT

• Engine delivery more than doubling

in the next 10 years:

• Last decade 1,600
• Next decade 4,000

CUSTOMER SERVICES POTENTIAL

• Service and support worth up to

four times the value of original equipment

• ver the lifetime of the engine

INVEST TO STAY AHEAD

• Pipeline of new products and technologies,

e.g. Advance and Ultrafan

WIDEBODY AIRCRAFT DEFEND AND BUILD MARKET SHARE

Heritage fmeet New deliveries

SIGNIFICANT AND GROWING SEGMENT OF CIVIL AEROSPACE MARKET

• 70% of all deliveries by volume,

and 50% by value

• Technology transfer from expertise

in widebody aircraft

• Access to greater market opportunity

in the long term

SUPPORTS FULL PRODUCT RANGE REQUIRED BY CUSTOMERS

• Strengthens customer relationships

PREPARE TO EQUIP NEXT GENERATION

• New narrowbody aircraft not

anticipated before mid-2020s

NARROWBODY AIRCRAFT RE-ENTER SINGLE AISLE MARKET

20-YEAR NEW DELIVERIES OF PASSENGER AND FREIGHTER AIRCRAFT

MEDIUM-SPEED ORIGINAL EQUIPMENT MARKET FORECAST (£BN)

MEDIUM-SPEED RECIPROCATING ENGINES GROW CAPABILITY IN MARKET

GROWING MARKET FOR MEDIUM-SPEED ENGINES

• Marine and land power

market anticipated to grow to £35 billion by 2023

• Fragmented market presents

growth opportunities

CUSTOMER BENEFITS

• Latest medium-speed engine: less fuel,

lower emissions, 20% more power per cylinder than previous product

• At sea: engine selection can infmuence

choice of other propulsion equipment, important for systems integration where we have expertise

• On land: meeting increasing global demand

for local distributed power from diesel or gas-fuelled medium-speed engines

CONFIDENCE IN THE FUTURE

CONFIDENCE IN THE FUTURE

STRONG ORDER BOOK

Original equipment and long-term service contracts give us visibility

• f revenues and demonstrate future

growth potential of the business

GROWTH MARKETS

The fundamentals of the business are strong. We have the technology and the skills to remain at the forefront of markets that will grow over the long term

R&D COMMITMENT

Investing more than £1 billion per year in innovation and technology to address new markets and meet current and future customer needs

TRUSTED TO DELIVER EXCELLENCE