Interim Results
29 July 2004
ROLLS-ROYCE GROUP plc INTERIM RESULTS 2004
Maintaining progress
"These results are in line with our expectations and are underpinned by
aftermarket services revenues which grew by 16 per cent in the first half.
"All our businesses have developed good market positions and, importantly, we
are established on new programmes which will shape the power systems markets
for the next generation.
"Our order book, continuing progress with cost reduction initiatives and our
performance on profit and average net debt in the first half, support our
guidance for the full year."
Sir John Rose, Chief Executive Rolls-Royce Group plc
Profit and cash flow consistent with guidance
* Underlying profit before taxation* £136 million (h1 2003: £115m)
* Profit on ordinary activities before taxation £129 million (h1 2003: £59m)
* Average net debt £550 million (h1 2003: £895m)
* Interim payment to ordinary shareholders maintained at 3.18p per share
Continuing growth in aftermarket services revenues
* Revenues increased by 16 per cent to £1.5 billion (h1 2003: £1.3bn)
* Revenues represent 55 per cent of Group sales (h1 2003: 50 per cent)
Growing order book
* £4.0 billion order intake (h1 2003: £4.0bn)
* Firm and announced backlog £19.7 billion (h1 2003: £19.0bn)
* Aftermarket services £7.1 billion (h1 2003: £6.5bn)
*See note 3
Overview
Results for the half-year ended June 30 2004 were in line with the company's
expectations, underpinned by aftermarket services sales which grew by 16 per
cent to £1.5 billion, representing 55 per cent of Group sales. Underlying
profit before tax was £136 million, an increase of 18 per cent, and underlying
earnings per share were 5.78 pence (h1 2003: 4.97p). Basic earnings per share
were 5.07 pence
(h1 2003: 2.09p)
Average net debt for the period was £550 million (h1 2003: £895m).
Rolls-Royce reinforced its market position in all its business sectors in the
first half of 2004, benefiting from its strategy of investing once in
technology and applying it many times. For example, technology developed for
the Trent engine programme has been exploited to win positions on new
programmes, which are at various stages of development in each business sector.
The Trent 1000, the fifth generation of Trent aero-engine, was selected to
power the new Boeing 7E7. The Trent engine family has now gained positions on
both the world's next-generation large airliners, the Airbus A380 and the
Boeing 7E7.
Trent technology also enabled the company to strengthen its position in the
defence sector, where it delivered the first fan module, using Trent fan blade
technology, for the F136 Joint Strike Fighter (JSF) engine.
In the marine sector, Lockheed Martin selected the Rolls-Royce MT30 gas
turbine, which is 80 per cent common with the Trent 800 aero-engine, for the US
Littoral Combat Ship programme. This follows the company's success in being
selected to power the US DD(X) destroyer demonstrator programme with the MT30.
The industrial Trent, also derived from the Trent 800, won its first
application in the oil and gas sector. Dolphin Energy ordered six Trent-powered
compressor sets for the export pipeline from Qatar to United Arab Emirates and
also signed a Long-Term Service Agreement covering the support of this
equipment.
The order book remained strong and ended the period at a record level of £18.1
billion (h1 2003: £17.6bn), following an order intake of £4.0 billion (h1 2003:
£4.0bn). A further £1.6 billion worth of business was announced (h1 2003: £
1.4bn), resulting in a firm and announced order backlog of £19.7 billion (h1
2003: £19.0bn). Aftermarket services accounted for 36 per cent of the firm and
announced order backlog (h1 2003: 34 per cent).
The company confirmed the latest phase in its transformation programme to
modernise factories, drive down costs and continue to make progress towards its
target of a 10 per cent return on sales. It is investing more than £100 million
in high value-added UK manufacturing facilities specialising in compression
systems, combustion systems, component services and turbine systems. The
company is on target to achieve a five per cent reduction in unit costs in
2004.
Outlook
Rolls-Royce has invested to build leading positions in four global markets. It
addresses these markets with common technology and capabilities, producing a
valuable portfolio effect for the business as a whole.
Market-leading technology has enabled Rolls-Royce to gain strong positions on a
new generation of programmes across all its business sectors. These programmes
will shape the power systems market for the next generation.
The long-term nature of product programmes leads to sustainable returns over
many years as a result of the high value-added aftermarket services opportunity
created each time a gas turbine is sold. The successful strategy to capture
this opportunity is demonstrated by the consistent growth of aftermarket
services in recent years.
The company's confidence in the business model is supported by the visibility
provided by its order book. Its continuing progress with cost reduction
initiatives and its performance on profit and average net debt in the first
half support 2004 full year guidance for profit growth and a reduction in
average net debt.
Enquiries
Peter Barnes-Wallis Maria Darby-Walker
Director of Financial Communications Head of Corporate Media Relations
Tel: 020 7222 9020 Tel: 020 7227 9239
www.rolls-royce.com
An interview on the results with Rolls-Royce Chief Executive, Sir John Rose, is
available on video, audio and text on www.Rolls-Royce.com . Photographs of
directors and products are available at www.newscast.co.uk
Sector reviews
Civil aerospace: Sales £1,453m (h1 2003: £1,198m); underlying profit before
interest £67m (h1 2003: £46m)
Highlights - original equipment
* Civil engine deliveries increased by 9 per cent to 384 and included
delivery of the 1000th Trent engine. Full year deliveries are expected to
be a little higher than in 2003.
* The Rolls-Royce Trent 1000 engine was selected as one of the two engines to
power the Boeing 7E7. Air New Zealand, the first airline to choose engines
for the 7E7, selected the Trent 1000 and also ordered Trent 800s for eight
Boeing 777s.
* The Trent 900, which will be the first engine into commercial service on
the Airbus A380, successfully completed its first flight.
* AirTran Airways ordered six BR715 powered Boeing 717 airliners.
* IAE, Rolls-Royce's joint venture with Pratt & Whitney, MTU and JAEC,
received orders for V2500 engines to power 30 A320s for Jet Blue Airlines.
Highlights - aftermarket services
* Rolls-Royce fleet flying hours increased by 16 per cent to the end of June
compared to the same period last year.
* Civil aerospace aftermarket revenues grew by 22 per cent and represented 58
per cent of civil aerospace sales in the first half.
* Rolls-Royce and American Airlines announced a five-year contract that could
be worth over $1.6 billion in repair and overhaul work for their joint
venture, Texas Aero Engine Services LLC.
* Singapore Airlines signed a ten-year TotalCare agreement covering
in-service support for the Trent 500 engines powering the airline's fleet
of Airbus A340-500 aircraft.
* The company continued to win new customers for CorporateCare®, its engine
care programme for corporate aircraft. It now has more than 315 aircraft
under flight hour agreements, with contract values exceeding $630 million.
Defence: Sales £638m (h1 2003: £642m); underlying profit before interest £66m
(h1 2003: £60m)
Highlights - original equipment
* Testing of the first short take off and vertical landing propulsion system
for the Joint Strike Fighter (JSF) was completed successfully.
* The first fan module was delivered for the F136 engine for the JSF
programme. This is the most powerful combat engine programme in which the
company has participated.
* Orders were received for 10 Pegasus engines for the Spanish and Italian
navies for their Harrier aircraft.
* The Light Helicopter Turbine Engine Company (LHTEC), a 50:50 joint venture
between Honeywell and Rolls-Royce, announced that the CTS800-4N turboshaft
engine had received a Type Certificate from the Federal Aviation
Administration.
* The first production NH90 helicopter, powered by Rolls-Royce Turbomeca
RTM322 engines, made its maiden flight.
Highlights - aftermarket services
* Rolls-Royce continued to develop its aftermarket services, which
represented 57 per cent of defence sales in the first half.
* The company announced that ST Aerospace Engines PTE, LTD., a Singapore
based repair and overhaul provider, had joined its global network of
Authorized Maintenance Centres for the T56-501D engine.
Marine: Sales £443m (h1 2003: £495m); underlying profit before interest £28m
(h1 2003: £40m)
Highlights - original equipment
* Following a long period of growth, sales in the offshore support vessel
market slowed in the second half of 2003. This market has now stabilized.
As a consequence sales in the first half of 2004 were lower than reported
in 2003. However, the Company has made progress in the naval market,
securing positions on several new programmes.
* The MT30 marine gas turbine completed a major development milestone,
receiving DNV (Det Norske Veritas) design approval, certifying the engine
at 36MW for High Speed, Light Craft and Naval Surface Vessels.
* Rolls-Royce was selected by Lockheed Martin to provide MT30 gas turbine
engines and waterjets for up to two ships of the Littoral Combat Ship
programme (LCS), the next generation of US Navy warship. The US Navy's
current shipbuilding plan calls for a total of 57 ships, for which the MT30
would be a candidate.
* The company took full ownership of the WR-21 programme from its partner,
Northrop Grumman. It increased provisions by £10 million for additional
costs associated with the programme. The first two WR-21 gas turbines for
the Royal Navy's Type 45 destroyer completed factory acceptance testing.
* The UK Ministry of Defence, acting on behalf of partner nations UK, France
and Norway, selected Rolls-Royce to provide the NATO Submarine Rescue
System. Under the £47 million contract, Rolls-Royce will create and lead a
team, which will design, build and support the system over the next ten
years.
* In the commercial marine sector, Rolls-Royce won coastal protection vessel
design contracts for new Norwegian and French coastguard vessels.
Highlights - aftermarket services
* Aftermarket services represented 44 per cent of marine sales in the first
half.
* The company completed the overhaul of Tyne and Olympus engines to extend
the life of Type 22 frigates acquired by the Romanian Navy.
Energy: Sales £186m (h1 2003: £237m); underlying profit before interest £1m
(h1 2003: £7m)
Highlights - original equipment
* Sales declined in the first half as a result of the phasing of engine
deliveries, which are weighted towards the second half of 2004.
* Rolls-Royce announced a $107 million contract from Dolphin Energy Limited,
the oil and gas exploration company, to supply six mechanical drive
industrial Trent Dry Low Emission (DLE) compression packages for the $3.5
billion Dolphin Gas Project in the Middle East.
* The company won a contract to provide pipeline compression equipment for
the prestigious West-East China Gas Pipeline Project (WEPP). The contract
is valued at over $150 million.
* An order was received for pipeline compressors, which will be used to move
gas along the sub-sea Interconnector Pipeline from mainland Europe to the
UK.
Highlights - aftermarket services
* Aftermarket services represented 42 per cent of sales.
* Rolls-Royce signed a Long-Term Service Agreement with Dolphin Energy
supporting six Trent-powered compressor sets for the export pipeline from
Qatar to United Arab Emirates. The initial agreement is worth more than
$40m over six years. If further renewal options are exercised the agreement
could last 30 years and be worth $300m.
Financial Services: Sales £26m (h1 2003: £27m); underlying profit before
interest £8m (h1 2003: £7m)
The Financial Services businesses comprise engine leasing, aircraft leasing and
power project development.
* Rolls-Royce and Partners Finance, the company's engine leasing joint
venture, owned 269 engines, of which 98 per cent by value were on lease to
36 customers.
* Pembroke Group, the company's aircraft leasing joint venture, owned 28
aircraft, which were all on lease.
* Rolls-Royce Power Ventures is the company's power project developer. It had
a portfolio of 13 projects in operation and a further two in construction
or commissioning.
Financial review
The firm order book was £18.1bn (h1 2003: £17.6bn). In addition, a further £
1.6bn had been announced (h1 2003: £1.4bn). Aftermarket services represented 36
per cent of the firm and announced order book (h1 2003: 34 per cent).
Sales increased by six per cent to £2,746m (h1 2003: £2,599m).
Underlying profit before tax was £136m (h1 2003: £115m). Underlying earnings
per share increased by 16 per cent, to 5.78p.
Gross research and development investment was £291m (h1 2003: £304m). Net
research and development investment was £129m (h1 2003: £145m). Net research
and development investment for the full year is expected to be at a similar
level to investment in 2003.
Risk and revenue sharing partners' (RRSPs) contributions to development
programmes, shown as other operating income, were £15m (h1 2003: £74m).
Payments to RRSPs in respect of sales achieved by the relevant engine
programmes were charged in cost of sales and amounted to £112m (h1 2003: £53m).
Arrangements with industrial RRSPs include their provision of free of charge
components. A successful programme will result in incremental future revenues
and higher payments to RRSPs.
Restructuring costs of £16m (h1 2003: £3m) were charged within cost of sales.
The taxation charge was £44m (h1 2003: £25m). The tax charge on an underlying
basis was £39m, representing 29 per cent of underlying profit before tax. (h1
2003: £34m, representing 30 per cent of underlying profit before tax).
Cash inflow during the first half was £35m (h1 2003: outflow £80m). Average net
debt was £550m (h1 2003: £895m). Net debt at the half year was £288m (h1 2003:
£675m). Total borrowing facilities amounted to £2.4 billion at the half year,
following the successful issue of a €750 million Eurobond and the retirement of
£282 million of facilities.
Net working capital was £500m (h1 2003: £523m), an increase of £117m in the
first half (h1 2003: £129m); inventory increased by £79m (h1 2003: £85m);
debtors reduced by £187m (h1 2003: £79m); and creditors reduced by £225m (h1
2003: £123m). During the first half, there was no change in debtors relating to
long-term contract accounting for TotalCare Packages (h1 2003: £52m increase)
and an £11m increase in associated creditors (h1 2003: £19m).
Provisions were down £21m in the first half at £774m (h1 2003: £782m), largely
reflecting foreign exchange adjustments.
There were no material changes to the Group's gross and net contingent
liabilities during the first half of 2004.
Rolls-Royce announced the divestment of Rolls-Royce Gear Systems, Inc to
Triumph Group Inc. The consideration for the divestment is $36 million, giving
rise to a profit that is treated as a non-operating item in the 2004 accounts.
The company made progress with the management of aircraft on the balance sheet.
At the half-year all four Boeing 757 aircraft were on lease to customers; one
A310 aircraft was on lease, one was under agreement for lease in the second
half and an offer to purchase the remaining A310 had been received (a small
impairment charge was taken against this aircraft). The company has also agreed
the disposal of its 50 per cent interest in four Boeing 747 aircraft. A
specific provision, which will cover any loss on disposal, had already been
made in respect of these aircraft.
As at June 30 2004, the FRS17 deficit relating to the UK pension schemes had
not changed materially from the valuation carried out at the end of December
2003.
The company is continuing to study the implications of the implementation of
International Financial Reporting Standards (IFRS). It plans to report 2004
full year results under UK GAAP and to provide a separate reconciliation to
IFRS in the period between the full year results and 2005 interim results,
which will be the first set of results for which reporting under IFRS is
mandatory.
The interim payment to ordinary shareholders is 3.18 pence per share (2003:
3.18p) and will be paid in the form of `B' shares. The interim payment is
payable on January 4 2005 to shareholders on the register on October 15 2004.
The ex-entitlement to `B' shares date is October 13 2004.
Payment of the non-cumulative preferential dividend on B Shares in respect of
the calculation period commencing on July 1 2004 will be paid on January 4 2005
to B Shareholders on the B Share register on November 26 2004. The dividend
rate will be 3.778125% being 75% of the LIBOR rate on June 30 2004 in
accordance with the Scheme Circular dated March 22 2004 and the Company's
Articles of Association.
Enquiries
Peter Barnes-Wallis Maria Darby-Walker
Director of Financial Communications Head of Corporate Media Relations
Tel: 0207 222 9020 Tel: 020 7227 9239
www.rolls-royce.com
Group Profit and Loss Account
For the half year to 30 June 2004
Half Year Half Year Year to
to to 31 December
30 June 2004 30 June 2003 2003
£m £m £m
Turnover: Group and share of joint 2,842 2,665 6,038
ventures
Sales to joint ventures 447 487 936
Less share of joint ventures' turnover (543) (553) (1,329)
Group turnover (note 1) 2,746 2,599 5,645
Cost of sales and other operating income (2,493) (2,371) (5,141)
and costs*
Research and development (net)** (129) (145) (281)
Group operating profit 124 83 223
Share of operating profit of joint 24 23 52
ventures
Total operating profit 148 106 275
Operating profit before exceptional item 148 135 329
Exceptional item (note 2) - (29) (54)
Profit on sale of businesses 11 (2) 6
Profit on sale of fixed assets 4 - (11)
Profit on ordinary activities before 163 104 270
interest (note 1)
Net interest payable - Group (24) (33) (66)
- joint ventures (10) (12) (24)
Profit on ordinary activities before 129 59 180
taxation ***
Taxation (44) (25) (64)
Profit on ordinary activities after 85 34 116
taxation and attributable to ordinary
shareholders
Payments to shareholders (see note 6) (54) (53) (137)
Earnings per ordinary share (note 3)
Underlying 5.78p 4.97p 12.20p
Basic 5.07p 2.09p 7.04p
Diluted basic 4.90p 2.08p 6.94p
* includes Other Operating Income 15 74 153
** Research and development (gross) (291) (304) (619)
*** Underlying profit before taxation 136 115 285
(note 3)
Group Statement of Total Recognised Gains and Losses
Profit attributable to ordinary 85 34 116
shareholders
Exchange adjustments on foreign currency (81) 18 (3)
net investments
Total recognised gains for the period 4 52 113
Summary Group Balance Sheet
Restated* Restated*
Half Year Half Year Year to
to to 31 December
30 June 2004 30 June 2003 2003
£m £m £m
Fixed assets
Intangible 798 870 863
Tangible 1,662 1,848 1,750
Investments - joint ventures 209 202 202
share of gross assets 1,088 1,123 1,113
share of gross liabilities (884) (927) (916)
goodwill 5 6 5
- other 59 64 63
________________________________________________________________________________________
2,728 2,984 2,878
Current assets
Stocks 1,041 1,243 962
Debtors 2,419 2,334 2,606
Short term deposits and investments 356 216 174
Cash at bank and in hand 1,115 454 794
________________________________________________________________________________________
4,931 4,247 4,536
Creditors
Amounts falling due within one year - (151) (365) (94)
Borrowings
- Other Creditors (2,475) (2,590) (2,759)
Amounts falling due after one year - Borrowings (1,608) (980) (1,197)
- Other Creditors (485) (464) (426)
Provisions for liabilities and charges (774) (782) (795)
________________________________________________________________________________________
Net assets 2,166 2,050 2,143
________________________________________________________________________________________
Capital and Reserves
Equity shareholders' funds 2,163 2,048 2,140
Equity minority interests in subsidiary 3 2 3
undertakings
________________________________________________________________________________________
2,166 2,050 2,143
________________________________________________________________________________________
Reconciliation of Movements in Shareholders' Funds
£m £m £m
At 1 January (restated) * 2,140 2,032 2,032
Total recognised gains for the period 4 52 113
Ordinary dividends (net of scrip dividend 20 (38) (8)
adjustments)
New ordinary share capital issued (net of 3 - 1
expenses)
Relating to own shares (2) 2 2
Goodwill transferred to the profit and loss (2)
account in respect of disposals of businesses - -
________________________________________________________________________________________
At period end 2,163 2,048 2,140
________________________________________________________________________________________
* see note 9
Summary Group Cash Flow Statement
Restated* Restated*
Half Year Half Year Year to
to to 31 December
30 June 2004 30 June 2003 2003
£m £m £m
Net cash inflow from operating activities 192 140 673
Dividends received from joint ventures 2 4 11
Returns on investments and servicing of finance (42) (42) (56)
Taxation paid (40) (22) (43)
Capital expenditure and financial investment (50) (94) (198)
Acquisitions and disposals 13 - (16)
Equity dividends paid (33) (36) (88)
_________________________________________________________________________________________
Cash inflow/(outflow) before use of liquid 42 (50) 283
resources and financing
Management of liquid resources (185) (133) (90)
Financing 417 (52) (17)
_________________________________________________________________________________________
Increase/(decrease) in cash 274 (235) 176
_________________________________________________________________________________________
Reconciliation of net cash flow to movement in
net funds
Increase/(decrease) in cash 274 (235) 176
Cash outflow from increase in liquid resources 185 133 90
Cash (inflow)/outflow from (increase)/decrease
in borrowings (416) 54 20
_________________________________________________________________________________________
Change in net funds resulting from cash flows 43 (48) 286
Borrowings of businesses acquired - - 33
Finance lease additions - (9) (10)
Amortisation of zero-coupon bonds (2) (2) (4)
Exchange adjustments (6) (21) (33)
_________________________________________________________________________________________
Movement in net funds 35 (80) 272
Net debt at 1 January (323) (595) (595)
_________________________________________________________________________________________
Net debt at period end (288) (675) (323)
_________________________________________________________________________________________
Reconciliation of operating profit to operating
cash flows
Operating profit 124 83 223
Amortisation of intangible assets 30 28 63
Depreciation of tangible fixed assets 93 96 223
Increase in provisions for liabilities and 1 10 3
charges
(Increase)/decrease in working capital/ (56) (77) 161
creditors due after more than one year
_________________________________________________________________________________________
Net cash inflow from operating activities 192 140 673
_________________________________________________________________________________________
* see note 9
Notes
Restated* Restated*
Half Year Half Year Year to
to to 31 December
30 June 2004 30 June 2003 2003
£m £m £m
1. Analysis by business segment
Group turnover
Civil aerospace 1,453 1,198 2,694
Defence 638 642 1,398
Marine** 443 495 1,003
Energy** 186 237 508
Financial services 26 27 42
_________________________________________________________________________________________
2,746 2,599 5,645
_________________________________________________________________________________________
Profit before interest
Civil aerospace 74 20 82
Defence 66 53 132
Marine** 17 23 39
Energy** (2) 3 23
Financial services 8 5 (6)
_________________________________________________________________________________________
163 104 270
_________________________________________________________________________________________
Underlying profit before interest***
Civil aerospace 67 46 131
Defence 66 60 147
Marine** 28 40 78
Energy** 1 7 23
Financial services 8 7 (4)
_________________________________________________________________________________________
170 160 375
_________________________________________________________________________________________
***before exceptional and non-trading items
Net assets/liabilities - excluding net debt
Civil aerospace 1,122 1,294 1,099
Defence 47 (4) 69
Marine** 567 620 577
Energy** 376 365 346
Financial services 342 450 375
_________________________________________________________________________________________
Net assets**** 2,454 2,725 2,466
_________________________________________________________________________________________
* See note 9
**The Diesels business, which was previously included in the Energy segment is
now included in the Marine segment. The impact of this change is; turnover £37m
(2003 half year £39m, full year £76m); profit before
interest £7m (2003 half year £3m, full year £7m); underlying profit before
interest £3m (2003 half year £3m, full year £7m); net assets £34m (2003 half
year £36m, full year £30m).
**** Net assets excludes net debt of £288m (2003 half year £675m, 2003 full
year £323m)
2. Exceptional items
Exceptional items in 2003 related to rationalisation costs, largely comprising
the continuation of previously announced severance programmes.
3. Earnings per ordinary share
Basic earnings per ordinary share are calculated by dividing the profit
attributable to ordinary shareholders of £85 million (2003 half year £34m, full
year £116m) by 1,677 million (2003 half year, 1,629 million, full year 1,647
million) ordinary shares, being the average number of ordinary shares in issue
during the period, excluding own shares held under trust which have been
treated as if they had been cancelled.
Underlying earnings per ordinary share have been calculated as follows.
Half Year to 30 June 2004
£m £m Pence
Profit before taxation 129
Profit attributable to ordinary shareholders 85 5.07
Exclude:
Net profit on sale of (11) (11) (0.66)
businesses
Net profit on sale of fixed (4) (4) (0.24)
assets *
Amortisation of goodwill 22 22 1.31
Related tax effect - 5 0.30
________________________________________________________________________________________
Underlying profit before taxation 136
Underlying profit attributable to 97
shareholders
Underlying earnings per share 5.78
* excluding lease engines and aircraft sold by financial services companies
Half Year to 30 June 2003
£m £m Pence
Profit before taxation 59
Profit attributable to ordinary shareholders 34 2.09
Exclude:
Exceptional rationalisation 29 29 1.78
Net loss on sale of 2 2 0.12
businesses
Amortisation of goodwill 25 25 1.53
Related tax effect - (9) (0.55)
________________________________________________________________________________________
Underlying profit before taxation 115
Underlying profit attributable to 81
shareholders
Underlying earnings per share 4.97
Year to 31 December 2003
£m £m Pence
Profit before taxation 180
Profit attributable to ordinary shareholders 116 7.04
Exclude:
Exceptional rationalisation 54 54 3.27
Net profit on sale of (6) (6) (0.36)
businesses
Loss on sale of fixed assets 9 9 0.55
*
Amortisation of goodwill 48 48 2.91
Related tax effect - (20) (1.21)
________________________________________________________________________________________
Underlying profit before taxation 285
Underlying profit attributable to 201
shareholders
Underlying earnings per share 12.20
* excluding lease engines and aircraft sold by financial services companies
Diluted earnings per ordinary share, are calculated by dividing the profit
attributable to ordinary shareholders of £85m (2003 half year £34m, full year £
116m) by 1,735 million (2003 half year 1,636 million, full year 1,671 million)
ordinary shares, being 1,677 million (2003 half year 1,629 million, full year
1,647 million) as above, adjusted by the bonus element of existing share
options of 58 million
(2003 half year 7 million, full year 24 million).
4. Group employees at the period end
30 June 30 June 31 Dec
2004 2003 2003
Number Number Number
Civil Aerospace 19,800 20,300 19,800
Defence 5,100 5,100 4,900
Marine* 7,100 7,400 7,300
Energy* 2,900 3,300 3,100
Financial services 100 100 100
_________________________________________________________________________________________
35,000 36,200 35,200
* 2003 half year and full year restated to reflect the inclusion of the Diesels
business in the Marine segment - previously included in Energy.
Gas Turbines operations personnel are allocated to the businesses on the basis
of level of activity.
5. Sales financing contingent liabilities
In connection with the sale of its products the Group will on some occasions
provide financing support for its customers. The Group's contingent liabilities
related to financing arrangements are spread over many years and relate to a
number of customers and a broad product portfolio. The contingent liabilities
represent the exposure the Group has in respect of delivered aircraft,
regardless of the point in time at which such exposures may arise. Exposures
are not reduced to a net present value.
During the first half of 2004 there were no material changes to the maximum
gross and net contingent liabilities.
6. B shares
Under arrangements approved by the Annual General Meeting on 5th May 2004, the
Company will issue B shares to shareholders in place of a dividend. These can
be redeemed for cash or converted into ordinary shares in the Company. As this
is not classed as a dividend, no accrual has been made for this in the
financial statements.
7. Pensions
The Accounting Standards Board has deferred the full implementation of FRS 17,
pending the introduction of International Financial Reporting Standards.
The Group's funding requirements for its schemes are derived from triennial
independent actuarial valuations. For the Vickers Group Pension Scheme and the
Rolls-Royce Group Pension Scheme the 2004 actuarial valuations (applicable in
March 2004, and April 2004 respectively) are in progress. The Group is
currently undertaking consultations with employees over a number of mitigating
actions in connection with the provision of pension benefits under these two
schemes in order to contain the additional funding costs.
8. International Financial Reporting Standards
All European Union listed companies are required to adopt International
Financial Reporting Standards (IFRS) for their financial statements from 2005,
which will include comparative information for 2004. The Group has been
evaluating the impact of IFRS on its published financial statements and an
assessment was provided in the 2003 annual report.
Preparatory work continues, to enable the Group to report under IFRS for the
first time when it announces its interim 2005 results. Prior to this it is the
Group's intention to restate its 2004 year-end results - which under existing
UK accounting standards will be announced in February 2005 - to allow time for
the impact of IFRS to be interpreted and adequately understood.
9. Preparation of interim financial statements
Throughout these financial statements, the 2003 comparatives have been restated
to reflect the adoption of UITF 38 - Accounting for ESOP trusts. This has
resulted in the reclassification of own shares as a deduction from
shareholders' funds.
The results for each half-year are unaudited. The comparative figures for the
year to 31 December 2003 have been abridged from the Group's financial
statements for that year, which have been delivered to the Registrar of
Companies. The auditors have reported on those financial statements; their
report was unqualified and did not contain a statement under s237(2)or (3) of
the Companies Act 1985.
The interim financial statements for the six months ended 30 June 2004 were
approved by the Board on 28 July 2004.
Latest directors dealings
- 1 day ago Premier Miton Group
- 1 day ago YouGov
- 1 day ago K3 Business Technology Group
- 1 day ago Foresight Group Holdings Limited NPV
- 1 day ago Investec