Rolls-Royce plc Preliminary Results 2000
LONDON, March 2 Rolls-Royce plc announced today
preliminary results for the year ended 31 December 2000. Highlights are:
2000 1999
Sales 5864m pounds 4634m pounds +27%
sterling
*Underlying profit before tax 436m pounds 368m pounds +18%
Underlying earnings per share 21.63 pence 19.52 pence +10.8%
Dividend 8.00 pence 7.25 pence +10.3%
Order book 13.1bn pounds 11.5bn pounds +14%
* See note 2
Sir Ralph Robins, Chairman, said: -
"We achieved our financial targets in 2000 including the predicted
reduction in average borrowings.
"In 2000, the management team met the challenge of successfully
integrating the Vickers acquisition and creating a world leader in marine
propulsion systems. We continue to strengthen our position in civil
aerospace, participate in many of the world's key defence aerospace programmes
and expect to grow our position in the Energy sector as we introduce new
products.
"In each of our market sectors we are able to exploit our core
technologies by developing a range of related products and value added
services. We enter 2001 with a record order book of more than 13 billion
pounds.
"Significant opportunities exist to provide support to our customers
throughout the life of the product in service. As a result service revenues
grew by 20 per cent during 2000."
Business overview
Rolls-Royce continued to develop its strong portfolio of businesses in
2000, increasing its focus, strengthening its market position and improving
its productivity.
The company met its financial targets and achieved a record order book.
Average net debt levels, before the impact of acquisitions, were reduced, as
the company predicted.
Rolls-Royce has anticipated customer needs in civil aerospace, defence,
marine and energy markets and has successfully invested in new products and
services to meet this demand. The capabilities and technologies developed to
satisfy the needs of customers, particularly in the aerospace sector, are
increasingly being applied in each of the company's markets.
The company has been an innovator in many areas of its business: -
-- Rolls-Royce developed the Trent family of engines, anticipating the
market need for a range of engines to power the new generation of
wide-bodied aircraft. This has enabled the company to stay ahead of
the competition, securing almost 50 per cent of the global market
opportunity.
-- Rolls-Royce and Partners Finance, established in 1989, anticipated the
growth of aircraft and engine leasing. The company has become the
world's largest specialist aero engine leasing business.
-- The acquisition in 1995 of the Allison Engine Company anticipated the
strong growth in the corporate and regional aircraft sector, where the
company is now a global leader. It also enabled the company to
consolidate its position on the US Joint Strike Fighter programme, the
world's largest defence aerospace programme.
-- The company has become a world leader in marine propulsion systems
following the acquisition of Vickers in 1999. Rolls-Royce is well
placed to benefit from the move towards integrated propulsion systems
and the growing emphasis on gas turbines in the commercial sector.
-- Across all its markets Rolls-Royce has developed a strong services
capability. Financial and aftermarket services account for 38 per cent
of the company's sales. They offer a strong growth opportunity as the
company extends the scope of its services for customers. By making
early investments in its repair and overhaul network, the company has
been able to double its share of the overhaul of Rolls-Royce civil aero
engines.
-- The company has invested in its predictive maintenance capability
through Data Systems and Solutions (DS&S), a joint venture with the
US-based Science Applications International Corporation. DS&S is
pioneering internet-based customer services, which are applicable in
each of Rolls-Royce's markets.
Prospects
The near-term outlook is consistent with the view given at the
announcement of its half year results in August 2000. Earnings growth is
expected to resume in 2002.
Rolls-Royce is well positioned for growth in each of its markets. These
markets present opportunities for the company to exploit its world-leading gas
turbine technology supported by a range of related products and services. In
2000, the company increased its focus on these activities with the sale of
non-core businesses, such as Materials Handling, Cochran Boilers and the major
part of Vickers Turbine Components.
The company strengthened its market position by introducing new products
and winning new customers. The Trent 500 was certificated, ahead of schedule;
the WR-21 marine engine was launched with the Royal Navy; the first
EJ200 production engine for Eurofighter was assembled and tested; and, in the
oil and gas sector, Rolls-Royce was chosen as a preferred supplier by BP
Amoco.
Good progress was made with the implementation of the new combustion
system for the industrial Trent. The company expects to complete this
exercise within the 120 million pounds provision established. Demand for the
industrial Trent is strong and the company anticipates annual sales will reach
30 units within five years.
Rolls-Royce has continued to increase efficiency. Sales per employee
increased by 11 per cent in 2000. In addition to ongoing restructuring, the
company announced further plans for the rationalisation of its business
following a period of rapid growth and increased complexity arising from
acquisitions and joint ventures.
Simplification of the business structure will reduce costs and deliver
substantial efficiency gains. The cost of this programme will amount to
150 million pounds, spread over three years, as previously announced. It is
now likely that about half of this will be incurred before the end of 2001.
The company's proposals include concentrating the large gas turbine
operations of its Energy business in Montreal and the consolidation of its
Naval Marine surface vessels business in Bristol. The company is also
assessing its engineering capabilities with a view to using this resource more
efficiently and effectively by co-locating it wherever possible with the
relevant Rolls-Royce business.
The company constantly reviews its supply chain to ensure that world-class
standards are achieved in design and manufacture of components, whether
outsourced or made by Rolls-Royce. The rationalisation programme includes a
detailed assessment of the future balance between in-house centres of
excellence and external sourcing.
In 2001, as previously indicated, underlying earnings are expected to be
unchanged. This is due to a combination of factors, including the mix of
business in civil aerospace, delayed sales of the industrial Trent and
continuing restructuring costs. Earnings growth is expected to resume in 2002.
The company has a well balanced portfolio of businesses which are all
expected to contribute to future growth. The strongest growth is expected to
occur in, energy, marine, financial services and defence. More modest growth
is expected from civil aerospace, where the company is investing in the Trent
600 and 900 engines. The current civil product portfolio is relatively new
and is expected to generate significant long term returns.
As a result of improving returns and asset efficiency, the company expects
to continue to reduce the average level of net debt, on a comparable basis.
Rolls-Royce plc preliminary results 2000
Underlying profit before tax was 436 million pounds, up 18 per cent over
1999. Underlying earnings per share grew by 10.8 per cent to 21.63 pence.
An exceptional provision of 120 million pounds was made, to cover the
costs associated with implementing new combustion technology on the industrial
Trent. 55 million pounds of this was utilised during the year. The balance
is expected to be utilised in 2001.
The firm order book was 13.1 billion pounds (1999 11.5 billion pounds).
In addition, a further 1.4 billion pounds had been announced but not yet
included in the order book (1999 1.7 billion pounds). Total care packages for
aftermarket services represented almost ten per cent of the order book. These
are long term contracts where only the first seven years revenue is included
in the order book.
Sales, including the impact of the acquisitions made in 1999, increased by
27 per cent to 5,864 million pounds (1999 4,634 million pounds). Civil spares
sales grew by 15 per cent, of which ten percentage points related to sales of
RB211 upgrade kits.
Underlying trading profit, before restructuring costs and after the net
impact of risk and revenue sharing partners, increased by 17 per cent, to
901 million pounds (1999 773 million pounds). Underlying trading margin
reduced by 1.3 percentage points, as a result of an increased loss in the
energy business and the lower defence profits.
Gross research and development investment was 604 million pounds
(1999 626 million pounds). Net research and development expenditure, before
receipts from risk and revenue sharing partners, increased to 371 million
pounds (1999 337 million pounds), as a result of the impact of acquisitions
and development of the Trent 500. Net research and development figures have
been restated to reflect the change of accounting presentation announced on
28 February 2001.
Risk and revenue sharing partners (RRSPs) contributed 341 million pounds,
now shown under other operating income (1999 232 million pounds). Payments to
RRSPs, charged in cost of sales, amounted to 129 million pounds
(1999 99 million pounds). Following the launch of the Trent 600 and 900, RRSP
receipts are expected to be relatively stable in 2001. Payments to RRSPs will
grow in line with sales of the relevant engine programme. Future receipts
will depend upon existing RRSP arrangements, the launch of new programmes and
the ability to attract new partners.
The taxation charge, at 83 million pounds, represents a rate of
22.8 per cent of underlying profits and reflects the write back of Advance
Corporation Tax written off in previous years.
Capital expenditure was 186 million pounds (1999 250 million pounds),
including 35 million pounds in respect of acquired businesses. In addition,
investment in finance companies was 67 million pounds (1999 162 million
pounds).
The fair value adjustments relating to newly acquired businesses, which
were reported provisionally in the 1999 accounts, have been finalised. This
has resulted in an overall increase to fair value adjustments of 33 million
pounds, with a corresponding increase in goodwill.
Average net debt, before the impact of acquisitions, was in line with the
company's plans and, at 335 million pounds, showed a 14 per cent reduction
over 1999 (1999 390 million pounds). Average net debt, after acquisitions,
was 1,323 million pounds. The company expects to continue to reduce average
net debt as a result of trading cash flows, control of working capital, cost
reduction and disposals of non-core activities. Net debt on 31 December 2000
was 690 million pounds.
Cash flow returns on invested capital are expected to grow, reflecting
more effective management of margins and enhanced utilisation of assets.
Margins will benefit from the company's broader business portfolio, cost
reduction and lower interest charges. Asset efficiency will be increased
substantially by the company's new Enterprise Resource Planning system, the
outcome of the company's rationalisation proposals and the results of the
make:buy review.
The proposed final dividend is 5.00 pence per share, an increase of
10 per cent over 1999, making a full year dividend of 8.00 pence per share
(1999 7.25 pence). The dividend is payable on 2 July 2001 to shareholders on
the register on 27 April 2001. The ex-dividend date is 25 April 2001.
REVIEW OF OPERATIONS
Civil aerospace: Sales 3,150m pounds; underlying profit before interest
332m pounds
The company's civil aerospace business will become more robust and
predictable as it grows and matures, reaping the benefits of a greater
installed base of engines.
Civil engine programmes typically reach the break-even point 10 to
15 years after the programme is launched and an engine programme may be in
service for more than 50 years. Over each programme the financial rewards are
substantial and are weighted towards the aftermarket for spare parts and
services. The return on sales depends, therefore, on the size and maturity of
the installed base of engines, which creates the aftermarket opportunity. The
company has taken steps to secure a high proportion of this opportunity
through the supply of spare parts and the development of aftermarket services.
In particular, total care packages have been put in place, which offer a
comprehensive service to customers throughout the life of the engine.
In 2001, profits will be lower as a result of the high proportion of civil
engine deliveries, combined with lower spares sales. Subsequent growth will
reflect continuing market success and the increasing maturity of the product
portfolio.
Rolls-Royce expects its installed base of engines to almost double over
the next five years, as a result of market share gains and the consequent
growth in engine deliveries. A growing proportion of the company's civil
aerospace profits will, therefore, arise from the aftermarket.
2000 was a strong year for the civil aerospace industry, with record new
aircraft orders placed. Rolls-Royce increased its market share and achieved
record engine deliveries.
Rolls-Royce secured a 31 per cent share of engine orders placed during the
year and a 27 per cent share of engines delivered. 1,091 engines were
delivered, a number which is expected to increase in 2001 and 2002 to more
than 1,300 engines per annum. This compares to an annual average of
400 engines in the first half of the 1990s and 200 engines in the late 1980s.
The increase in engine deliveries reflects the company's success in
building a strong portfolio of aero engines, which it has achieved through
investment in new products, acquisitions and joint ventures.
In the airline sector, success was achieved across the product range, from
regional airliners to large wide-bodied aircraft.
The Trent 700 and 800, in service on the Airbus Industrie A330 and Boeing
777 respectively, secured new orders from customers in Europe, North America,
South East Asia and the Middle East.
The Trent 500, under development for the A340-500 and 600 aircraft, gained
certification ahead of schedule. Ten customers have placed firm and option
engine orders with a total value of $5.8 billion.
The Trent 900 won launch customers on the new Airbus Industrie
A380 aircraft. Singapore Airlines and Virgin Atlantic ordered up to
37 Trent-powered A380s, worth more than $2 billion. Since the year end the
company has been selected by Qantas to power its 12 A380 aircraft.
The RB211-535, powering the Boeing 757, won new orders from American Trans
Air, Continental Airlines and American Airlines. Deliveries of the 535 engine
are expected to grow over the next two years.
Demand in the regional airline sector remains strong. Orders for
Rolls-Royce AE3007 powered Embraer regional jets now exceed 1,200 aircraft.
AE3007 engine deliveries exceeded 400 in 2000 and are expected to grow to
approximately 500 in 2001.
Growth in the corporate jet sector has been stimulated by the introduction
of new aircraft and fractional ownership. Rolls-Royce has a sole-source
engine position on a range of corporate aircraft, including the Bombardier
Global Express, the Cessna Citation X and the Gulfstream IV and V. Gulfstream
announced a new generation of the GIV which will be powered by the Rolls-Royce
Tay engine. Embraer launched a corporate version of the Rolls-Royce powered
ERJ 145.
The company made good progress with the integration of Rolls-Royce
Deutschland which had previously been a joint venture with BMW. In 2000,
Rolls-Royce Deutschland delivered almost 200 engines for corporate and
regional aircraft.
Defence: Sales 1,403m pounds, underlying profit before interest 154m
pounds
Rolls-Royce is a transatlantic defence company with a strong, mature
product range and participation in many of the world's new defence programmes.
In 2000, profits were affected by the phasing of long-term contracts,
particularly the EJ200 engine for Eurofighter. Profits are expected to grow
in 2001 and beyond.
The EJ200 engine is making the transition from development to production.
The first production engine was assembled and tested in December. Output is
expected to increase to around 100 engines a year by 2003. Rolls-Royce has a
36 per cent share of the engine production contract, which covers up to
1,500 engines for 620 aircraft. The company also owns 47 per cent of ITP, the
Spanish engine company which also participates in this programme.
The first Pegasus Mk 107 engines were delivered to the Royal Air Force to
power its Harrier GR 7 aircraft fleet, under an agreement to upgrade up to
126 engines, worth 350 million pounds. The upgrade, one of the first examples
of Smart Acquisition, provides more than 10 per cent additional thrust over
the current engines.
Rolls-Royce expanded its defence portfolio through its participation in a
new European consortium which will develop the TP400 engine for the A400M
European transport aircraft. The company will be responsible for the low
pressure compressor and the overall integration of the engine. ITP will be
responsible for the engine casings and dressings.
Participation in the TP400 consolidates the company's position as a world
leader in the transport sector, where it also supplies engines for the C-130J
and V-22 aircraft.
The United States Department of Defense (DoD) is the company's largest
defence customer. Rolls-Royce supplies the DoD with a range of engines for
many sectors, including combat, trainer, transport, maritime patrol, aerial
surveillance and helicopters. The US Joint Strike Fighter programme is one of
the world's largest defence procurement programmes. Rolls-Royce is
participating in each of the competing aircraft configurations, the prototypes
of which made their first flights in 2000. The UK Government recently
confirmed its participation in the engineering, manufacturing and development
stage of the programme.
Rolls-Royce forecasts demand for nearly 10,000 gas turbine powered
helicopters over the next ten years. 55 per cent of the demand is expected to
arise in the civil market and 45 per cent in defence.
The RTM 322 completed 3,000 hours operation in the GKN Westland Apache.
The British Army has ordered 67 Apache helicopters with entry into service
scheduled for the end of this year.
Germany, France and the Netherlands selected Rolls-Royce Turbomeca RTM
322 engines, with a potential value of one billion dollars, for up to
399 twin-engined NH90 helicopters.
An order for 320 MTR390 engines for the Franco-German Tiger helicopter was
signed in 2000. Deliveries begin this year and run through to 2011.
Customer support offers a growing opportunity for Rolls-Royce in the
defence sector. Customers are focusing upon their core activities, creating
an opportunity for Rolls-Royce to provide a range of services from long term
support to complete managed fleet solutions. The company offers its customers
modern logistic planning and management processes designed to improve
operational effectiveness and reduce life cycle support costs. In 2000,
further integrated logistic support services for the EJ200 engine were
announced.
Vickers Defence Systems won a 70 million pound contract, to supply spare
parts and logistics services to the Ministry of Defence in support of the
British Army's Challenger 2 main battle tank. Vickers Specialist Engines was
selected as preferred bidder to the Field Electrical Power Supply (FEPS)
programme to provide mobile generators for the British Army. The programme is
estimated to have a total value of more than 100 million pounds over the next
15-20 years.
Marine: Sales 751m pounds, underlying profit before interest 67m pounds
Rolls-Royce has developed a world leading marine business, serving
customers in commercial and naval markets. The acquisition of Vickers in 1999
added a range of complementary products and services and expanded the
company's routes to market.
The integration of Vickers has proceeded well, with the company achieving
its acquisition objectives.
Rolls-Royce expects its marine business to grow substantially over the
next five years. This growth is driven by three main factors:
-- A naval re-equipment cycle is commencing, as new vessels are introduced
incorporating advanced technologies and offering lower through life
costs. The WR-21 marine gas turbine, developed in partnership with
Northrop Grumman, represents the next generation of fuel-efficient
engines. It achieved a significant breakthrough when it secured a
launch order for the first three ships of a new fleet of air defence
destroyers for the Royal Navy. A class of up to 12 Type 45 destroyers
is planned.
-- The company is benefiting from a strong recovery in the commercial
offshore service vessel sector. In the past year, Rolls-Royce designs
and packages of equipment have been selected for 53 offshore service
vessels, representing a record order intake in this sector. The total
value of these contracts, which include packages of Rolls-Royce
propulsion equipment, is 170 million pounds.
-- The company will benefit from its enhanced market position, as it
addresses the whole of the marine market with its comprehensive product
range and systems integration capability. In particular the company
will be able to exploit developments in the commercial sector, where it
has world-leading positions with its broad range of propulsion
components. This, combined with an in-depth knowledge and gas turbine
technology, allows the marine business to offer competitive proposals
for the new generation of cruise and cargo vessels. Rolls-Royce has
been selected to power the first of a new generation of fast cargo
vessels, FastShip, with the 50MW marine Trent and Kamewa water jets.
The marine business offers an excellent opportunity to exploit the gas
turbine technology originally developed for aerospace applications.
Computational fluid dynamics tools, developed for aerospace, are being applied
to marine propulsor design. Aerospace materials, manufacturing engineering
and advanced measurement techniques are helping to reduce costs and improve
the performance of the company's marine products. The core gas turbine
technology is being applied to a broad range of marine gas turbines, to 50MW.
The company plans to introduce new aero-derivatives to match the needs of the
marine market.
Energy: Sales 476m pounds, underlying loss before interest 48m pounds
Rolls-Royce plans to generate significant growth in its energy business,
with the launch of new products. The addressable market is forecast to be
worth $165 billion over the next ten years and the company is making
significant investments with the objective of securing an increasing
proportion of the growing global energy market. About three quarters of this
opportunity lies in power generation and one quarter in the oil and gas
sector.
In each of these sectors the company is pursuing the strategy of
developing a strong market position through the exploitation of its core gas
turbine technology.
In the power generation sector, the deregulation and privatisation of the
electricity supply industries, environmental pressures, infrastructure
constraints and the growing availability of gas are all creating higher levels
of demand which Rolls-Royce is addressing through its range of gas turbine and
diesel equipment.
The financial performance of the energy business reflects the high level
of investment in the industrial Trent and the start-up nature of this
business.
The company has made good progress with the implementation of the new
combustion system for the industrial Trent. It is on target to demonstrate
this system in a production environment in the second quarter of this year.
Demand for the product is strong and the company expects annual sales to reach
30 units within five years.
Sales in the oil and gas sector fell in 2000, as levels of investment in
the oil and gas exploration industry remained subdued. Order intake improved
in the first quarter of 2001, supported by the sustained recovery in oil
prices, with more orders being secured in this period than in the whole of
2000. This will benefit the company's sales in 2001 and beyond.
The company successfully integrated the compressor and packaging business
of Cooper Cameron, acquired in 1999. This has enabled it to offer integrated
solutions and improved support to customers through aftermarket services. The
aftermarket offers significant growth prospects for the energy business as it
exploits the capabilities developed in other parts of the company, such as
predictive maintenance techniques and total care packages.
Financial Services: Sales 40m pounds, underlying profit before interest
56m pounds
The financial services businesses comprise subsidiary and joint venture
companies. These offer engine leasing, aircraft leasing and management, and
power project development services in support of the company's core business
activities.
Rolls-Royce has invested 370 million pounds over the past five years in
its financial services. These businesses are making an increasing
contribution to profits as they grow and mature. They have been developed
through partnerships which share investment and risk and which bring expertise
and objectivity.
The gross assets of the financial services businesses, including partner
shares, amount to 1.7 billion pounds. Net assets amount to 112 million
pounds, reflecting the financial structure of the joint ventures, with a large
proportion of the gross assets funded by non-recourse debt. Gross sales
amounted to 190 million pounds.
Rolls-Royce Power Ventures, the company's energy services subsidiary,
ended the year with 12 power generation projects in operation and four
projects in late stage commissioning. Through these projects, RRPV sells
electricity to utilities and industrial clients in nine countries on four
continents. Rolls-Royce power generation equipment is used extensively in
these projects. The potential for RRPV's business grows as more countries
privatise their power generation industries and more industrial customers
subcontract their energy services.
Pembroke Group, the company's aircraft leasing joint venture, continued to
grow. It has a portfolio of 145 aircraft owned, managed or on order or
option. GATX, the US-based finance and leasing company, recently became an
equal partner with Rolls-Royce in this joint venture, endorsing the approach
that Rolls-Royce has taken in the development of this business.
Rolls-Royce and Partners Finance, the world's largest specialist aero gas
turbine leasing business, is also a 50:50 partnership with GATX. The company
had a successful year and made an increased profit contribution. By the end
of the year, it had 190 engines, representing 13 engine types, in its lease
portfolio.
Aftermarket services: Sales and profit figures are included in the
relevant market sectors.
Rolls-Royce has continued the strategic development of its aftermarket
activities. The entry into service of a Rolls-Royce engine marks the start of
a customer relationship which may last 25 years or more. This creates a
significant opportunity through the provision of spare parts and associated
services. In the civil aerospace sector, the supply of spare parts over the
life of an engine generates revenue equivalent to the original list price of
the engine. The company's expanded range of aftermarket services will
generate further revenue.
Over the past five years the company has invested 200 million pounds in
the expansion of its aerospace repair and overhaul network, including joint
ventures and acquisitions. This has enabled the company to more than double
its share of the repair and overhaul of Rolls-Royce aero engines. Sales,
including all those of the joint ventures, have more than trebled, with the
number of worldwide locations increasing from six to 17.
The company has continued to develop total care packages. These offer a
comprehensive aftermarket service to customers, covering the operation and
maintenance of the engine throughout its life. Whilst pioneered in the civil
aerospace business, the concept of total care is increasingly being applied in
the company's other business sectors. In January 2001, the company announced
a maintenance support agreement with American Airlines, worth one billion
dollars over ten years, for its fleet of RB211-535 engines.
Data Systems and Solutions (DS&S) completed its first full year of
operation. The company provides predictive services, including engine health
monitoring and engine shop visit forecasting. These services are applied to
total care packages and are yielding potential savings ten times greater than
their cost. DS&S launched aeromanager.com in 2000, providing new predictive
services which add value to the customer's operation. aeromanager.com
combines information from a wide variety of sources within Rolls-Royce with
data collected from engines in service.
Operational improvement
Rolls-Royce is concentrating its improvement activities on a number of
well-defined areas, with a strong emphasis on reducing lead times. The
company aims to achieve a step change in performance by shortening the time
from order receipt to delivery of an engine, and by continuing to invest in
lean manufacturing techniques.
The improvement activities also have a strong focus on the reduction of
costs in all areas of operation with aggressive targets set, backed by
appropriate implementation plans.
Underpinning all the improvement activities is an ongoing investment in
the company's use of information. This is being approached through a balanced
strategy of new e-business developments combined with major replacement of
back-office systems. The aims of the e-business programmes are to provide
enhanced services to customers, whilst at the same time making significant
reductions in transaction costs with suppliers and partners. Major roll-out
programmes for back-office systems have continued and include the new
Enterprise Resource Planning system, as well as new systems for the management
of product definition data and in-service product performance data.
Group profit and loss account
for the year ended December 31, 2000
Continuing Exceptional Total Restated
operations items** 2000 Total 1999
before
exceptional
items
Notes m pounds m pounds m pounds m pounds
Turnover:
Group and share
of joint ventures 5,955 -- 5,955 4,697
Sales to joint
ventures 893 -- 893 799
Less share of
joint ventures'
turnover (984) -- (984) (862)
Group turnover 1 5,864 -- 5,864 4,634
Cost of sales (4,860) (145) (5,005) (3,787)
Gross profit 1,004 (145) 859 847
Other operating
income 341 -- 341 232
Commercial,
marketing and
product support
costs (268) -- (268) (195)
General and
administrative
costs (271) -- (271) (171)
Research and
development
(net)* (371) -- (371) (337)
Group operating
profit 435 (145) 290 376
Share of operating
profit of joint
ventures 76 -- 76 31
Loss on sale or
termination of
businesses (5) (73) (78) (14)
Profit on sale of
fixed assets 1 -- 1 20
Profit on ordinary
activities before
Interest 1 507 (218) 289 413
Net interest payable
- Group (85) -- (85) (35)
- joint ventures (38) -- (38) (18)
Profit on ordinary
activities before
taxation 384 (218) 166 360
Taxation (99) 16 (83) (74)
Profit on ordinary
activities after
taxation 285 (202) 83 286
Equity minority
interests in
subsidiary
undertakings -- (2)
Profit attributable
to ordinary
shareholders 83 284
Dividends (126) (112)
Transferred (from)/
to reserves (43) 172
* Research and
development
(gross) (604) (626)
Earnings per
ordinary share: 2
Underlying 21.63p 19.52p
Basic 5.33p 18.86p
Diluted basic 5.30p 18.62p
** exceptional items are: industrial Trent provision (120)m pounds
acquisition restructuring (16)m pounds
rationalisation (9)m pounds
disposal of Materials
Handling (73)m pounds
(218)m pounds
Group Balance sheet
at December 31, 2000
restated
2000 1999
m pounds m pounds
Fixed assets
Intangible assets 889 918
Tangible assets 1,772 1,753
Investments - subsidiary undertakings -- --
- joint ventures 174 151
share of gross assets 1,117 958
share of gross liabilities (943) (807)
- other 33 31
2,868 2,853
Current assets
Stocks 1,179 1,274
Debtors - amounts falling due within one year 1,591 1,292
- amounts falling due after one year 482 355
Short-term deposits and investments 142 464
Cash at bank and in hand 498 521
3,892 3,906
Creditors - amounts falling due within one year
Borrowings (272) (408)
Other creditors (2,559) (2,467)
Net current assets 1,061 1,031
Total assets less current liabilities 3,929 3,884
Creditors - amounts falling due after one year
Borrowings (1,058) (1,271)
Other creditors (206) (109)
Provisions for liabilities and charges (601) (503)
2,064 2,001
Capital and reserves
Called up share capital 314 309
Share premium account 623 615
Revaluation reserve 108 112
Other reserves 182 140
Profit and loss account 836 812
Equity shareholders' funds 2,063 1,988
Equity minority interests in
subsidiary undertakings 1 13
2,064 2,001
Group cash flow statement
for the year ended December 31, 2000
restated
Notes 2000 1999
m pounds m pounds
Net cash inflow from
operating activities A 479 359
Dividends received from
joint ventures 13 6
Returns on investments
and servicing of finance B (76) (32)
Taxation paid (25) (38)
Capital expenditure and
financial investment C (253) (199)
Acquisitions and disposals D (53) (666)
Equity dividends paid (74) (88)
Cash inflow/(outflow) before
use of liquid resources
and financing 11 (658)
Management of liquid resources E 324 261
Financing F (360) 622
(Decrease)/increase in cash (25) 225
Reconciliation of net cash flow
to movement in net funds
(Decrease)/increase in cash (25) 225
Cash (inflow) from (decrease)
in liquid resources (324) (261)
Cash outflow/(inflow)
from decrease/(increase)
in borrowings 370 (618)
Change in net funds
resulting from cash flows 21 (654)
Borrowings of businesses
acquired -- (332)
Amortisation of zero-coupon bonds (3) (3)
Exchange adjustments (14) (7)
Movement in net funds 4 (996)
Net (debt)/funds at January 1 (694) 302
Net debt at December 31 (690) (694)
Reconciliation of operating profit
to operating cash flows 2000 1999
m pounds m pounds
Operating profit 290 376
Amortisation of intangible assets 60 19
Depreciation of tangible fixed assets 178 105
(Profit)/loss on disposals of
tangible fixed assets (3) 4
Increase/(decrease) in provisions
for liabilities and charges 49 (34)
Decrease in stocks 62 39
Increase in debtors (374) (127)
Increase/(decrease) in creditors 217 (23)
A Net cash inflow from operating activities 479 359
Returns on investments and servicing of finance
Interest received 26 26
Interest paid (96) (51)
Interest element of finance lease payments (6) (7)
B Net cash outflow for returns on
investments and servicing of finance (76) (32)
Capital expenditure and financial investment
Additions to unlisted investments (2) --
Addition to certification costs (10) --
Purchases of tangible fixed assets (292) (381)
Disposals of tangible fixed assets 51 187
Acquisitions of own shares by trust -- (5)
C Net cash outflow for capital expenditure
and financial investment (253) (199)
Acquisitions and disposals
Acquisitions of businesses (45) (653)
Disposals of businesses (5) 14
Investments in joint ventures (13) (27)
Loan repayments from joint ventures 10 --
D Net cash outflow for
acquisitions and disposals (53) (666)
Management of liquid resources
Decrease in short-term deposits 327 262
Increase in government securities
and corporate bonds (3) (1)
E Net cash inflow/(outflow) from
management of liquid resources 324 261
Financing
Borrowings due within one year
- repayment of loans (147) --
- increase in loans -- 88
Borrowings due after one year
- repayment of loans (725) (196)
- new loans 510 734
Capital element of finance lease payments (8) (8)
Net cash (outflow)/inflow from
(decrease)/increase in borrowings (370) 618
Issue of ordinary shares 10 4
F Net cash (outflow)/inflow from financing (360) 622
Group statement of total recognised gains and losses
for the year ended December 31, 2000
2000 1999
m pounds m pounds
Profit attributable to the shareholders
of Rolls-Royce plc 83 284
Exchange adjustments on foreign currency
net investments 30 17
Total recognised gains for the year 113 301
Group historical cost profits and losses
for the year ended December 31, 2000
2000 1999
m pounds m pounds
Profit on ordinary activities before taxation 166 360
Difference between the historical cost
depreciation charge and the actual
depreciation charge for the year
calculated on the revalued amount 4 2
Historical cost profit on ordinary
activities before taxation 170 362
Historical cost transfer to reserves (39) 174
Reconciliations of movements in Group shareholders' funds
for the year ended December 31, 2000
2000 1999
m pounds m pounds
At January 1 1,988 1,705
Total recognised gains for the year 113 301
Ordinary dividends (net of
scrip dividend adjustments) (89) (101)
New ordinary share capital issued
(net of expenses) 10 75
Goodwill transferred to the profit
and loss account in respect of
disposal of businesses 41 8
At December 31 2,063 1,988
Notes
1. Segmental Analysis
restated
2000 1999
m pounds m pounds
Group turnover
Analysis by businesses:
Civil aerospace 3,150 2,544
Defence 1,403 1138
Marine Systems 751 385
Energy 476 482
Financial Services 40 37
Materials Handling 44 48
5,864 4,634
Profit before interest
Analysis by businesses:
Civil aerospace 312 232
Defence 151 181
Marine Systems 38 37
Energy (191) (39)
Financial Services 55 24
Materials Handling (76) (22)
289 413
Underlying profit before interest**
Analysis by businesses:
Civil aerospace 332 224
Defence 154 182
Marine Systems 67 43
Energy (48) (30)
Financial Services 56 24
Materials Handling (2) (22)
559 421
** before exceptional and non trading items
Net assets*
Analysis by businesses:
Civil aerospace 1,152 1,074
Defence 286 312
Marine Systems 600 595
Energy 444 468
Financial Services 295 243
Materials Handling (23) 3
2,754 2,695
* Net assets exclude net debt of 690m pounds (1999 694m pounds)
The segmental analysis of exceptional items is: Civil aerospace
9m pounds, Marine systems 3m pounds, Energy 133m pounds, and Materials
Handling 73m pounds.
2. Earnings per ordinary share
Basic earnings per ordinary share are calculated by dividing the
profit attributable to ordinary shareholders of 83 million pounds
(1999 284m pounds) by 1,558 million (1999 1,506 million) ordinary
shares, being the average number of ordinary shares in issue during
the year, excluding own shares held under trust which have been
treated as if they have been cancelled.
Underlying profit before taxation and earnings per ordinary share for
2000 have been calculated as follows:
m pounds m pounds Pence
Profit before Taxation 166
Profit attributable to
ordinary shareholders 83 5.33
Exclude:
Net loss on sale of businesses
- Materials handling 73 73 4.69
- Other 5 5 0.32
Loss on sale of fixed assets* 1 1 0.06
Amortisation of goodwill 46 46 2.95
Restructuring of acquired business 16 16 1.03
Exceptional rationalisation 9 9 0.58
Energy - exceptional charge 120 120 7.70
Related tax effect -- (16) (1.03)
Underlying profit before taxation 436
Underlying profit attributable
to shareholders 337
Underlying earnings per share 21.63
* excluding lease engines and aircraft sold by financial services
companies.
Diluted basic earnings per ordinary share are calculated by dividing the
profit attributable to ordinary shareholders of 83m pounds
(1999 284m pounds) by 1,566 million (1999 1,525 million) ordinary shares,
being 1,558 million (1999 1,506 million) as above adjusted by the bonus
element of existing share options of 8 million (1999 19 million).
3. Group Employees at the period end
31 December 31 December
2000 1999
Number Number
Civil Aerospace 24,500 25,700
Defence 7,300 7,900
Marine Systems 6,500 6,600
Energy 5,300 5,600
Financial Services 100 100
Businesses disposed -- 3,700
43,700 49,600
4. The financial information above does not constitute the Group's
statutory accounts for the year ended December 31, 2000 or 1999.
Statutory accounts for 1999 have been delivered to the Registrar of
Companies, whereas those for 2000 will be delivered following the
annual general meeting. The auditors have reported on those
accounts; their reports were unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.
