Rolls-Royce Holdings plc 2014 Full-Year Results John Rishton, Chief - PowerPoint PPT Presentation

Rolls-Royce Holdings plc 2014 Full-Year Results John Rishton, Chief Executive Trusted to deliver excellence

2 Rolls-Royce Holdings plc 2014 Full-Year Results David Smith, Chief Financial Officer Trusted to deliver excellence

Group highlights of 2014 performance 3 2013 2014 Order book (£ billion) 71.6 73.7 Excluding divested Energy business 70.4 73.7 Revenue (£ million) 15,505 14,588 Excluding divested Energy business 14,634 13,864 1,759 1,617 Profit before tax (£ million) Excluding divested Energy business 1,695 1,620 11.8 11.5 Return on sales (%) Excluding divested Energy business 12.1 12.1 781 254 Free cash flow (£ million) Excluding divested Energy business 778 447 65.6 65.3 Earnings per share (p) 22.0 23.1 Payment to shareholders (p) Trusted to deliver excellence

Group revenue 2014 vs. 2013 4 -3% £ million (465) (776) 13,864 Trusted to deliver excellence • •

Group profit 2014 vs. 2013 5 £ million Flat ( ) ( ) ( ) ( ) (49) (49) 1,620 1,620 1,619 Trusted to deliver excellence

Group 2014 profit vs. free cash flow 6 £ million 447 Trusted to deliver excellence

Group free cash flow 2014 vs. 2013 7 £ million 429 Trusted to deliver excellence

Group financial strength 8 S&P: A/Stable Credit rating Moody’s: A3/Stable Maintain investment-grade rating Total liquidity £4.1 billion Strong liquidity Share buyback Spread to 2026 Debt maturities No material maturities 2015 – 2016 Foreign exchange and commodity Risk management hedging Trusted to deliver excellence

9 Business Segment Performance

Civil Aerospace 10 £ million Drivers Order book • Up 5% Revenue • Strong OE growth £m Profit • Higher volumes • TotalCare contract catch up • Higher restructuring • Higher R&D Trusted to deliver excellence •

Defence Aerospace 11 £ million Drivers Order book • Up 12% Revenue • Lower volumes Profit • Lower volumes • Cost reduction benefits (30) (26) • Favourable mix shift towards aftermarket Trusted to deliver excellence

Power Systems 12 £ million Drivers Order book • Up 2% 2,877 2,865 2,733 Revenue • • 2,720 Foreign exchange • Sector mix changes Profit • Foreign exchange • Bergen performance 253 Trusted to deliver excellence

Marine 13 £ million Drivers Order book • Down 3% due to foreign exchange 1,848 1,845 1,845 1,712 1,709 Revenue 1,709 • Foreign exchange • Oil price weakness Profit • Lower volumes • One-off charge • Adverse mix shift • Cost reduction 2013 figures restated to exclude Submarines, now part of Nuclear & Energy Trusted to deliver excellence

Nuclear & Energy 14 £ million Drivers Ongoing Nuclear business (871) Order book 682 • Down 4% 23 1,511 1,458 Revenue £m • Submarines growth Profit • Higher volumes 48 • Efficiency improvements • Non-repeat of 2013 charges 2013 figures restated to include Submarines, previously in Marine Trusted to deliver excellence

More uncertain near-term environment 15 Oil prices GDP forecasts Geopolitics Metal prices Currency volatility Trusted to deliver excellence

2015 Group guidance 16 Guidance at constant 2014 foreign exchange 2014 2015 Guidance (excluding Energy) 13.4 – 14.4 Revenue (£ billion) 13.9 1,400 – 1,550 Profit before tax (£ million) 1,620 200 Free cash flow (£ million) 447 +/- 150 60 – 66 Earnings per share (p) 65.3 Results expected to remain weighted to H2 as in 2014 Capital expenditure (£ million) 649 ~600 (Property, plant, and equipment) 4.7% of revenue 819 Net R&D spend (£ million) ~750 5.9% of revenue Tax rate (%) 24 24 Trusted to deliver excellence

2015 Segment guidance 17 Guidance at constant Revenue (£ million) Profit (£ million) 2014 foreign exchange Aerospace 2014 2015 2014 2015 7,000 – 7,300 800 – 900 Civil Aerospace 6,837 942 1,900 – 2,100 360 – 410 Defence Aerospace 2,069 366 Land & Sea 2,500 – 2,750 200 – 250 Power Systems 2,720 253 1,450 – 1,650 90 – 120 Marine 1,709 138 670 – 730 40 – 50 Nuclear 684 48 Trusted to deliver excellence

Roadmap: Our transformation 18 2011-2013 2014-2017 2018-2020 Delivering the benefits Began focus on 4Cs Transforming our business; growing our installed base  Growing installed base,  Rising Civil Large Engine  Customer cash & margins deliveries  Concentration  20% footprint reduction  Restructuring/  underutilisation Costs  Technology investment  Land & Sea cost &  Cash  Land & Sea growth integration focus Trusted to deliver excellence

Focus on costs – operational efficiency 19 Focus on cost and collaboration with suppliers on OE and spares Strong programme on lifecycle costs Deployment of lean processes throughout the business Reducing indirect costs and improving efficiency Trusted to deliver excellence

Focus on costs – transformation of industrial base 20 Significant investment in new capacity, technology, and capability Multi-year program through 2020 Aero restructuring announcement Operating leverage Land & Sea cost focus increasing Trusted to deliver excellence

Focus on free cash flow 21 Near-term Medium-term Investment OE margins improving as exit launch phase Restructuring Aftermarket revenue and cash Low-margin OE at launch rising Capital expenditure efficiency Net working capital growth Cost improvement actions Inventory efficiencies Trusted to deliver excellence

Summary 22 2014 challenging year 2015 – 2017 continues key transformation phase Preparing for growth: Civil Large Engine volumes double Multi-year transformation programme through end of decade Long-term model very attractive Trusted to deliver excellence

23 Rolls-Royce Holdings plc 2014 Full- Year Results John Rishton, Chief Executive Trusted to deliver excellence

Key messages 24 Fundamentals strong – continuing investment in future growth Addressing growing pains Taking decisive action to build a stronger company Trusted to deliver excellence

Customer 25 Improving quality, delivery, reliability and responsiveness Customer awards Airbus Supply Chain and Quality Improvement Award US Air Force: First tier supplier US Defense Logistics Agency: First tier supplier Aviation International News: First place for quality of support Trusted to deliver excellence

26 Concentration Sharpening our focus Sold Bought Energy Power Systems Fuel Cells Aero Engine Controls Tidal Generation R Brooks RTM 322 HyperTherm Well Intervention SmartMotor Trusted to deliver excellence

Cost & Cash 27 Making progress across the business Progress across the Group Group gross margin up 1.7pp Time on wing Trent 700/Trent 800 doubled Defence return on sales improved Inventory reduced £140 million Indirect headcount reduced 18% Aero restructuring: 2,600 headcount reduction Operational footprint by 2020 reduced by >20% Trusted to deliver excellence

Civil Large Engine fleet today 28 Russia & Northern Europe CIS Eastern Europe China North America Southern Europe North Middle Asia North East Africa Central Central SE Asia America Indian Africa Subcontinent 2014 Latin America Installed Southern Australasia Africa Engine Count 4 3 0 0 Trusted to deliver excellence

Installed engine base 2014 Civil Large Engine fleet in 2024 29 Installed engine base 2024 Russia Northern Europe & CIS E. Europe S. Europe North America China North Asia North Middle Africa East SE Asia Indian 2024 Subcontinent Latin America Installed Southern Engine Count Africa Australasia 7 5 0 0 Trusted to deliver excellence Rolls-Royce proprietary information

30 Long-term growth driven by installed thrust Trusted to deliver excellence

Group logic 31 Industrial • Advanced engineering capability Commercial • Scale, breadth, and balance Strategic • Long-term growth markets Trusted to deliver excellence

Long-term global trends underpin profitable growth 32 Source: BP Energy Outlook Trusted to deliver excellence

Growth in widebody fleet 33 9,116 New deliveries Heritage fleet Source: Airbus GMF app & Global Market Forecast ‘Flying on demand 2014 2033’ Trusted to deliver excellence

Key messages 34 Fundamentals strong – continuing investment in future growth Addressing growing pains Taking decisive action to build a stronger company Trusted to deliver excellence

Q&A 35 John Rishton Chief Executive David Smith Chief Financial Officer James Guyette President, Rolls-Royce North America Inc. Colin Smith Director, Engineering & Technology Tony Wood President, Aerospace Lawrie Haynes President, Land & Sea Trusted to deliver excellence