Final Results
Rolls-Royce PLC
7 March 2002
7 March 2002
ROLLS-ROYCE plc PRELIMINARY RESULTS 2001
Consistent strategy continues to deliver value
Rolls-Royce plc announced today preliminary results for the year ended 31
December 2001. Highlights are:
• Profit and cash in line with guidance
• Record sales - up eight per cent at £6.3 billion
• Profit before tax* up nine per cent at £475 million
• Earnings per share* up four per cent at 20.20p
• Positive cash flow of £189 million
• Average net debt reduced by 25 per cent to £990 million
• Cost reduction on target
• Well positioned
• Building strong market positions in all businesses
• Record order intake of £8.7 billion
• Record year-end order book of £14.4 billion
• Aftermarket and services revenues represent 40 per cent of Group sales
• Long-term service agreements account for 16 per cent of the order book
Sir Ralph Robins, Chairman, said: 'This was a robust performance, reflecting the
benefits of the strategic changes made by management over recent years and the
prompt action taken to mitigate the financial impact of the events of September
11.
'Market conditions, in 2002, are developing very much in line with the guidance
we issued on October 19, last year. Over the past decade we have built a
balanced business with strong market positions and a growing aftermarket, whilst
also reducing our cost base. We are well positioned for profit growth in 2003,
relative to 2002.
'This is my last set of annual results, as, in accordance with previous plans, I
will retire within the next 12 months and a process is in place to identify a
non-executive Chairman from outside the company.
'The excellent performance of the company over the past year assures me that I
will be leaving behind a strong business with a bright future in the hands of a
highly effective management team under Chief Executive John Rose's leadership'
*before exceptional and non-trading items (see note 3)
Enquiries
Peter Barnes-Wallis Colin Duncan
Director of Financial Communications Director of Corporate Communications
Tel: 0207 222 9020
www.rolls-royce.com
Business overview
Over the past decade Rolls-Royce has been transformed through the pursuit of a
consistent strategy, founded on gas turbine technology, to create a balanced
business portfolio and a strong management team. Whilst growing its civil
aerospace business, the company has also strengthened its position in marine,
energy, defence and financial services. The company has become robust through
organic growth and through focused and well-integrated acquisitions, which have
broadened its product range and opened up new markets.
This balance enabled the company to mitigate the immediate effects of the events
of September 11, which were further offset by the prompt management action taken
to reduce costs. Overall results for 2001 were, therefore, in line with the
previous guidance provided by the company, with civil aerospace a little ahead
of expectations. Profit before tax* increased by nine per cent to £475 million.
Earnings per share* increased by four per cent to 20.20p.
In 2001, the company increased its order book by 10 per cent, following another
year of record order intake. At the year-end the firm order book stood at £14.4
billion. A further £2.3 billion of orders had been announced but not signed.
Total order intake between
September 11 and the year-end amounted to £3 billion. The current order book,
at £15 billion, is now higher than at the year end.
Rolls-Royce has also developed a strong services activity, which currently
accounts for approximately 40 per cent of total sales. The provision of
aftermarket services is an important feature of all the company's business
sectors, with individual product service lives often exceeding 25 years.
Service revenues have grown by 50 per cent over the past five years and
increased by six per cent in 2001. They are expected to continue to grow as a
result of deliveries of new engines, the increase in the maturity of the
installed base of engines and the growth of the company's repair and overhaul
activities. The high level of proprietary technology embedded in Rolls-Royce
products provides a competitive advantage and enables the company to offer a
growing range of value- added services.
Rolls-Royce operates in growth markets, in which it has established strong
positions. The company believes the current adverse market conditions in civil
aerospace do not materially affect the long-term value of the business.
* before exceptional and non-trading items (see note 3)
Prospects
On October 19 2001, following a major review, the company set out the detailed
planning assumptions underlying its expectations for 2002. This included the
impact these assumptions would have on demand and capacity and the consequences
for workload and employment at its facilities around the world.
Since October, the company has continued to refine its understanding of the
potential impact of the events of September 11. Overall results for 2002 are
expected to be consistent with the guidance provided last year.
On October 19 the company forecast that 2002 civil aerospace profit before
interest would be approximately half the expected 2001 level. However, this
business performed better than forecast in 2001 with the result that, whilst
profit in civil aerospace, in absolute terms, is expected to be in line with the
original guidance, it is now anticipated to fall by slightly more than half
relative to the actual 2001 out-turn.
The company expects to deliver approximately 900 civil engines in 2002.
However, the momentum in the civil aerospace business is positive. Today, the
company's aftermarket revenue is generated by approximately half its installed
base of 9,000 civil jet engines. The increasing maturity of this installed
base, combined with additions of new engines, will generate future aftermarket
growth. Over the next twenty years
Rolls-Royce forecasts revenue passenger mile growth of five per cent per annum,
creating a growing market for aero engines. The company expects to continue to
secure a significant share of this market.
The market for military aero engines is also forecast to grow steadily. The
company's defence business has a strong position in many of the world's new
programmes.
The marine business has been strengthened by the successful integration of the
Vickers acquisition and is benefiting from new programmes in the naval market
and a strong flow of orders in the commercial offshore market.
The performance of the energy business will improve as new products are
introduced into service. In particular, further orders for the industrial Trent
are expected.
The financial services businesses are now making a substantial contribution to
profits. Over the long-term these businesses are expected to grow in support of
the company's core activities.
Building competitive advantage
All the company's businesses provide a significant aftermarket service and
outsourcing opportunity, with some 53,000 gas turbines in service. The company
is expanding the scope of its aftermarket activities from traditional support,
such as spare parts supply and repair and overhaul, to enhanced services, such
as engine health monitoring, predictive services and web-enabled information
exchange. The company is able to build on the competitive advantage of its
installed base, experience, proprietary technology and knowledge of the product.
These enable it to offer tailored support packages, such as Total Care and
Mission Ready Management Services, to generate incremental revenue and profit.
In addition to organic growth, the company has acquired and integrated a number
of new businesses, including the Allison Engine Company, Vickers, Cooper Energy
Services' compressor business, and National Airmotive. It has also established
important repair and overhaul joint ventures with customers. The company has
sold 40 non-core businesses over the past decade.
In building a more robust and balanced business, Rolls-Royce has also created a
highly integrated and effective management team. In 1998, a new organisation
was implemented to give greater focus on delivering customers' requirements.
Since then, three quarters of senior management positions within the company
have been filled by new people, a third of them coming from outside the company.
The restructuring programme, announced on October 19, 2001, is proceeding to
plan. The company expects to complete the major part of the workforce reduction
of 5,000 people by the end of the first quarter of 2002. This action, coupled
with the existing rationalisation programme, is expected to lower the cost base
by £250 million.
The company's wide range of products, technical excellence, success in the
market place, growing aftermarket activities and lower cost base all contribute
to its strong competitive position.
Financial review
Sales were increased by 8 per cent to £6,328m (2000 £5,864m).
Underlying trading profit, before risk and revenue sharing partner receipts and
net research and development, increased by 23 per cent, to £628m (2000 £511m).
Underlying trading margin increased to 9.9 per cent from 8.7 per cent.
Underlying profit before tax was £475m (2000 £436m). Underlying earnings per
share increased by four per cent, to 20.20p.
The firm order book was £14.4bn (2000 £13.1bn). A further £2.3bn of orders were
announced but not signed (2000 £1.4bn). Services represented 27 per cent of the
firm order book.
The company continued to build its technology base with gross research and
development investment of £636m (2000 £604m). Net research and development
investment was £358m (2000 £371m).
Receipts from risk and revenue sharing partners (RRSPs), shown under other
operating income, were £239m (2000 £341m), reflecting the level of activity on
major development programmes. Payments to RRSPs, charged in cost of sales,
amounted to £113m (2000 £129m). RRSP agreements are a standard form of
co-operation in the civil aero-engine industry. For the engine maker they bring
some, or all, of the following benefits:- additional financial and engineering
resource; sharing of risk; and contribution to the initial programme investment.
As appropriate the partner supplies components free of charge and subsequently
receives a share of the revenues generated by the engine programme, in
proportion to its purchased programme share.
Restructuring costs of £25m (2000 £45m) were recorded within cost of sales.
As announced on October 19 2001, the company expected to spend a total of £290m
to complete its ongoing rationalisation exercise and to reduce capacity to
reflect the lower demand in the civil aerospace sector resulting from the events
of September 11. Of the £290m, £86m was expensed during the year. A provision
of £144m has been made to cover specific restructuring activities and the
company expects the balance of £60m to be charged as an exceptional item during
2002.
Provisions were £882m (2000 £720m). The increase in provisions included £57m of
additional customer financing provisions and £35m relating to technical problems
with the Allen 5000 and A601. These were all charged within cost of sales.
The taxation charge, at £86m (2000 £87m), reflects the adoption of FRS19, as
announced at the half year. Underlying earnings per share were 20.20p (2000
19.38p).
Capital expenditure was £161m (2000 £186m) and investment in financial
businesses was £60m (2000 £67m).
Average net debt was reduced by 25 per cent to £990m. Net debt on 31 December
was £501m (2000 £690m). The recommended final dividend is 5.00 pence per share
(2000 5.00p), making a full year dividend of 8.18 pence per share, an increase
of 2.3 per cent over 2000. The dividend is payable on July 1 2002 to
shareholders on the register on April 26 2002. The ex-dividend date is April 24
2002.
Review of operations
Civil Aerospace - 2001 sales £3443m Underlying profit £347m
Growing services and improving business mix
In 2001 Rolls-Royce secured a 30 per cent share of jet engine orders placed,
maintaining its second place ranking amongst the world's engine manufacturers.
New engine deliveries of 1,362 were the highest ever for the company.
In 2002, the company expects to deliver around 900 engines. With its growing
and relatively young installed base of engines and its strengthened aftermarket
services, the civil aerospace business is in a robust competitive position.
The Trent engine family made good progress in 2001. The Trent 900 was launched
for the A380, with orders from Singapore Airlines, Virgin Atlantic and Qantas.
The Trent 500 made its first flight, powering the A340-600 with production
deliveries commencing towards the end of 2001. The Trent 800 received a
significant new order from Singapore Airlines and the Trent 700 recorded four
new airline customers. Five new risk and revenue sharing partners joined the
Trent 900 programme during the year.
International Aero Engines had another successful year winning 72 per cent of
engine orders for the A320 family, its highest ever percentage share.
Deliveries of AE3007 and BR715 engines for regional jets were at record levels
in 2001. The 1,000th AE3007 engine was delivered, highlighting the success of
this product in both the regional airline and corporate aircraft sectors.
The market for large corporate aircraft was strong in 2001 and has been less
impacted by September 11 than the airline market. Rolls-Royce achieved a 32 per
cent market share of engine orders in this category and the BR710 engine was
selected for Bombardier's new model, the Global 5000.
Strong progress was also made in the development of aftermarket services. The
company has over 9,000 civil jet engines in service and its broad services
capability is increasing potential business. The proportion of the installed
base covered by Total Care packages increased to just over 30 per cent during
the year. An initial group of 15 airlines went on line with aeromanager.com,
the Rolls-Royce e-business portal that provides a comprehensive range of
aftermarket services. The company's global repair & overhaul network was
extended with the establishment of Singapore Aero Engine Services, which
commenced operations early in 2002.
Defence - 2001 Sales £1400m Underlying profit £175m
Well positioned on new programmes
The company's ability to offer a wide range of products, its strong US position
and its unique technology led to significant progress in the defence aerospace
sector in 2001.
The highlight of the year was the award of a $1 billion contract for the
development of the short take-off vertical landing system for the F-35 Joint
Strike Fighter, the world's largest fighter programme. The F136 alternate
engine for the F-35 also secured its next phase contract. Rolls-Royce is teamed
with General Electric and has a 40 per cent share of this important programme.
The first production EJ200 engine for Eurofighter Typhoon was delivered and the
company signed a contract with the UK Ministry of Defence to provide aftermarket
support for this programme.
The company's strong position in the defence transport sector was extended with
the certification of the AE 2100 engine on the C-27J transport aircraft and the
supply of AE2100 and T800 engines for the US-1A Kai amphibious aircraft.
The first production Adour Mk106 engines for upgraded Jaguar aircraft were
supplied to BAE SYSTEMS and the first development Adour Mk 951 was delivered for
the latest version of the Hawk trainer aircraft.
The Rolls-Royce Turbomeca RTM322 helicopter engine gained five new customers,
having been selected by Denmark, Finland, Norway, Portugal and Sweden. Initial
LHTEC CTS800 production engines were delivered and Thailand became a new
customer for the T800-powered Super Lynx. Australia became the first export
customer for the MTR390-powered Tiger helicopter.
New partnerships were announced, designed to enhance the company's strategic
position and secure future business. Rolls-Royce Snecma Ltd. will conduct
technology programmes for future combat aero engines supported by the UK and
French governments. Air Tanker (in which Rolls-Royce has a 20 per cent share)
is bidding to provide an innovative solution for the UK's Future Strategic
Tanker Aircraft requirement.
Aftermarket services are a key element of the defence business, which has
customers in more than 160 armed forces around the world. The company is
developing partnerships to provide total service solutions, tailored to the
needs of the individual customer. It further developed its aftermarket business
through agreements with Aviall Inc, Lockheed Martin Corporation and Standard
Aero Ltd.
Vickers Defence Systems made a larger contribution to defence profits, following
a good performance in 2000. This was due to effective management of the
Challenger 2 contract, enabling a one-off release of contingencies as the
contract progressed towards completion. A similar contribution is not expected
in the year ahead. The company signed a £250 million contract with the UK
Ministry of Defence for the supply of next generation engineering tanks for the
Army. In January, 2002, discussions which may lead to the sale of Vickers
Defence Systems were confirmed.
Marine - 2001 Sales £827m Underlying profit £73m
Continuing strong order intake
The successful integration of Vickers' marine business has created a world
leader in marine propulsion systems. During 2001, Rolls-Royce continued to
maintain market leading positions in both the commercial and naval marine
markets. The company is focused on becoming the leading provider of integrated
power, propulsion and motion control solutions worldwide.
The offshore supply and service vessel market continued to be strong. The
company ended the year with £270 million of contracts to supply its UT ship
designs and integrated equipment for a record 71 vessels.
Rolls-Royce is playing a significant role in the prestigious Queen Mary 2 cruise
liner project through the supply of MermaidTM podded propulsion systems, Brown
Brothers stabilisers and Rauma Brattvaag cable handling equipment.
Contracts with a value in excess of £100 million were signed to supply 12
advanced cycle WR-21 marine gas turbines and Kamewa propulsion systems for the
first six ships in the Royal Navy's new Type 45 class of air defence destroyers.
The Trent 800 aero-engine is being adapted and tested to allow it to be used in
marine applications. The Marine Trent offers a market leading power-to-weight
ratio and a high degree of operational flexibility to both commercial and naval
customers.
Customer support services are an important element of the marine business.
Long-term contracts worth up to £760 million were signed with the UK Ministry of
Defence to ensure the safety and power performance of the Royal Navy's nuclear
submarine fleet.
Energy - 2001 Sales £608m Underlying loss £64m
Introducing new products
Rolls-Royce is an established world-wide supplier to the oil and gas markets, a
growing equipment provider to the power generation industry, and a significant
supplier of aftermarket services.
Its gas turbine products serve major energy markets in gas compression, oil
pumping and power generation. Other Rolls-Royce energy products include
centrifugal gas compressors, control systems, and innovative, customised service
products such as Long-term Service Agreements.
Investment in a range of new products for the power generation market has
continued to affect the profitability of the energy business.
The company has broadened its power generation product range through the
development of the industrial Trent. Further development work, which includes
completion of a standard of combustion system that can be retrofitted to
existing power stations, is being undertaken. Recent successful testing of an
alternative combustion system has resulted in the resumption of marketing of the
industrial Trent. There is very significant potential for the Trent in power
generation applications, despite short term market weakness following the events
of September 11 and the company has recommenced taking orders.
The industrial RB211, the highest output gas turbine in its class, is gaining
increased global acceptance in the independent power generation sector.
Shipments in 2001 to customers in Europe and South America included the first
upgraded 32.1 MW units.
2001 was a good year for the company's oil and gas business, which has developed
into a global operation. Orders received in 2001 included industrial RB211
engines for installations in Algeria, Azerbaijan, Brazil, Indonesia, Malaysia,
Pakistan and North America. The oil and gas market for 2002 looks equally
encouraging.
Customer service activities are provided in both the oil and gas and power
generation sectors. The growing number of Long-term Service Agreements offers
customers more reliable and profitable operations, while opening up new
opportunities for the company.
Financial services - 2001 Sales £50m Underlying profit £63m
Robust performance
Rolls-Royce aims to provide its customers with a complete service, from the
financing of the initial product sales to ongoing maintenance and after sales
support. The financial services businesses comprise engine leasing (Rolls-Royce
and Partners Finance), aircraft leasing (Pembroke) and electrical power project
development (Rolls-Royce Power Ventures).
Rolls-Royce and Partners Finance (RRPF), established in 1989, is a 50:50 joint
venture with GATX Capital and is the world's largest engine leasing specialist
with 243 engines on lease to 40 lessees in 22 countries. During the year, RRPF
diversified its asset base to include the A501, Avon, RB211 and Trent industrial
engines. Utilisation of the fleet of lease engines remained high after
September 11, with 98 per cent of engines on lease at the year end.
Pembroke Group, also a 50:50 joint venture with GATX Capital, had a fleet at the
year end of 64 owned aircraft and 49 aircraft managed on behalf of third
parties. It worked closely with its airline customers in the critical weeks
following September 11 and as a result no aircraft leased by Pembroke have been
returned.
In the energy market, Rolls-Royce Power Ventures continued to develop its
portfolio of projects. It ended the year with 12 power generation projects in
operation, three in construction, and four in the late stages of commissioning.
Enquiries
Peter Barnes-Wallis Colin Duncan
Director of Financial Communications Director of Corporate Communications
Tel: 0207 222 9020
An interview about the results with Rolls-Royce Chief Executive, John Rose, is
available in video, audio and text on www.rolls-royce.com and www.cantos.com
Group profit and loss account
for the year ended December 31, 2001
Continuing Exceptional Total 2001 Restated Total
operations items** 2000***
before
exceptional
items
Notes £m £m £m £m
Turnover: Group and share of joint ventures 6,680 - 6,680 5,955
Sales to joint ventures 871 - 871 893
Less share of joint ventures' turnover (1,223) - (1,223) (984)
Group turnover 1 6,328 - 6,328 5,864
Cost of sales (5,193) (213) (5,406) (5,005)
Gross profit 1,135 (213) 922 859
Other operating income 239 - 239 341
Commercial, marketing and product support costs (283) (5) (288) (268)
General and administrative costs (269) (12) (281) (271)
Research and development (net)* (358) - (358) (371)
Group operating profit 464 (230) 234 290
Share of operating profit of joint ventures 82 - 82 76
Loss on sale or termination of businesses (11) - (11) (78)
Profit on sale of fixed assets 6 - 6 1
Profit on ordinary activities before interest 1 541 (230) 311 289
Net interest payable - Group (77) - (77) (85)
- joint ventures (42) - (42) (38)
Profit on ordinary activities before taxation 422 (230) 192 166
Taxation (155) 69 (86) (87)
Profit on ordinary activities after taxation 267 (161) 106 79
Equity minority interests in subsidiary - -
undertakings
Profit attributable to ordinary shareholders 106 79
Dividends (132) (126)
Transferred from reserves (26) (47)
*Research and development (gross) (636) (604)
Earnings per ordinary share: 3
Underlying 20.20p 19.38p
Basic 6.67p 5.07p
Diluted basic 6.56p 5.04p
** see note 2
Underlying profit and earnings are defined in note 3
*** Restated for FRS 19 'Deferred Tax'
Group balance sheet
at December 31, 2001
restated
2001 2000
£m £m
Fixed assets
Intangible assets 823 877
Tangible assets 1,732 1,772
Investments - subsidiary undertakings - -
- joint ventures 204 174
share of gross assets 1,341 1,117
share of gross liabilities (1,144) (943)
goodwill 7 -
- other 30 33
2,789 2,856
Current assets
Stocks 1,222 1,179
Debtors - amounts falling due within one year 1,640 1,591
- amounts falling due after one year 810 590
Short-term deposits and investments 301 142
Cash at bank and in hand 578 498
4,551 4,000
Creditors - amounts falling due within one year
Borrowings (276) (272)
Other creditors (2,720) (2,559)
Net current assets 1,555 1,169
Total assets less current liabilities 4,344 4,025
Creditors - amounts falling due after one year
Borrowings (1,104) (1,058)
Other creditors (288) (206)
Provisions for liabilities and charges (882) (720)
2,070 2,041
Capital and reserves
Called up share capital 320 314
Share premium account 636 623
Revaluation reserve 103 108
Other reserves 189 182
Profit and loss account 820 813
Equity shareholders' funds 2,068 2,040
Equity minority interests in subsidiary undertakings 2 1
2,070 2,041
Group cash flow statement
for the year ended December 31, 2001
2001 2000
Notes
£m £m
Net cash inflow from operating activities A 418 479
Dividends received from joint ventures 15 13
Returns on investments and servicing of finance B (54) (76)
Taxation paid (24) (25)
Capital expenditure and financial investment C (179) (253)
Acquisitions and disposals D 79 (53)
Equity dividends paid (84) (74)
Cash inflow before use of liquid resources and
financing 171 11
Management of liquid resources E (162) 324
Financing F 111 (360)
Increase/(Decrease) in cash 120 (25)
Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash 120 (25)
Cash outflow/(inflow) from increase/(decrease) in liquid resources 162 (324)
Cash (inflow)/outflow from (increase)/decrease in borrowings (95) 370
Change in net funds resulting from cash flows 187 21
Amortisation of zero-coupon bonds (3) (3)
Exchange adjustments 5 (14)
Movement in net funds 189 4
Net debt at January 1 (690) (694)
Net debt at December 31 (501) (690)
2001 2000
Reconciliation of operating profit to operating cash flows
£m £m
Operating profit 234 290
Amortisation of intangible assets 57 60
Depreciation of tangible fixed assets 198 178
Profit on disposals of tangible fixed assets - (3)
Increase in provisions for liabilities and charges 180 49
(Increase)/decrease in stocks (52) 62
Increase in debtors (386) (374)
Increase in creditors 187 217
A Net cash inflow from operating activities 418 479
Returns on investments and servicing of finance
Interest received 25 26
Interest paid (73) (96)
Interest element of finance lease payments (6) (6)
B Net cash outflow for returns on investments and servicing of finance (54) (76)
Capital expenditure and financial investment
Additions to unlisted investments (1) (2)
Addition to intangible assets (25) (10)
Purchases of tangible fixed assets (211) (292)
Disposals of tangible fixed assets 56 51
Other investments 2 -
C Net cash outflow for capital expenditure and financial investment (179) (253)
Acquisitions and disposals
Acquisitions of businesses (1) (45)
Disposals of businesses 102 (5)
Investments in joint ventures (24) (13)
Loan repayments from joint ventures 2 10
D Net cash inflow/(outflow) for acquisitions and disposals 79 (53)
Management of liquid resources
(Increase)/decrease in short-term deposits (159) 327
Increase in government securities and corporate bonds (3) (3)
E Net cash inflow/(outflow) from management of liquid resources (162) 324
Financing
Borrowings due within one year - repayment of loans (46) (147)
- increase in loans 85 -
Borrowings due after one year - repayment of loans (2) (725)
- new loans 69 510
Capital element of finance lease payments (11) (8)
Net cash inflow/(outflow) from increase/(decrease) in borrowings 95 (370)
Issue of ordinary shares 16 10
F Net cash Inflow/(outflow) from financing 111 (360)
Group statement of total recognised gains and losses
for the year ended December 31, 2001
2001 restated
£m 2000
£m
Profit attributable to the shareholders of Rolls-Royce plc 106 79
Exchange adjustments on foreign currency net investments (11) 30
Total recognised gains for the year 95 109
Prior year adjustment relating to FRS 19 (23)
Total recognised gains recognised since last Annual Report 72
Group historical cost profits and losses
for the year ended December 31, 2001
2001 restated
£m 2000
£m
Profit on ordinary activities before taxation 192 166
Difference between the historical cost depreciation charge and the actual
depreciation charge for the year calculated on the revalued amount 5 4
Historical cost profit on ordinary activities before taxation 197 170
Historical cost transfer to reserves (21) (43)
Reconciliations of movements in Group shareholders' funds
for the year ended December 31, 2001
2001 restated
£m 2000
£m
At January 1 (as previously reported) 2,063 -
Prior year adjustment relating to FRS 19 (23) -
At January 1 (restated) 2,040 1,967
Total recognised gains for the year 95 109
FRS 19 adjustment relating to goodwill - 2
Ordinary dividends (net of scrip dividend adjustments) (90) (89)
New ordinary share capital issued (net of expenses) 16 10
Goodwill transferred to the profit and loss account in respect of disposal of
businesses 7 41
At December 31 2,068 2,040
Notes
1. Segmental analysis
restated
2001 2000
£m £m
Group turnover
Analysis by businesses:
Civil aerospace 3,443 3,150
Defence 1,400 1,403
Marine 827 751
Energy 608 476
Financial Services 50 40
Materials Handling - 44
6328 5,864
Profit before interest
Analysis by businesses:
Civil aerospace 198 312
Defence 132 151
Marine 37 38
Energy (118) (191)
Financial Services 62 55
Materials Handling - (76)
311 289
Underlying profit before interest*
Analysis by businesses:
Civil aerospace 347 332
Defence 175 154
Marine 73 67
Energy (64) (48)
Financial Services 63 56
Materials Handling - (2)
594 559
*before exceptional and non trading items
Net assets**
Analysis by businesses:
Civil aerospace 1,124 1,116
Defence 179 261
Marine 513 582
Energy 381 449
Financial Services 374 346
Materials Handling - (23)
2,571 2,731
**Net assets exclude net debt of £501m (2000 £690m)
The segmental analysis of exceptional items is: Civil aerospace £136m, Defence
£38m, Marine £15m, Energy £41m.
2. Exceptional items
Rationalisation costs relate to termination of employment, site decommissioning
and relocation, and related disruption to operations, including accelerated
depreciation of plant and machinery. At December 31, 2001 £144m was included in
provisions.
3. Earnings per ordinary share
Basic earnings per ordinary share are calculated by dividing the profit
attributable to ordinary shareholders of £106 million (2000 £79m) by 1,589
million (2000 1,558 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 have been
calculated as follows:
Year to 31 December 2001
£m £m Pence
Profit before taxation 192
Profit attributable to ordinary shareholders 106 6.67
Exclude:
Exceptional - rationalisation 230 230 14.47
Net loss on sale of businesses 11 11 0.69
Profit on sale of fixed assets* (3) (3) (0.19)
Amortisation of goodwill 45 45 2.83
Related tax effect - (68) (4.27)
Underlying profit before taxation 475
Underlying profit attributable to shareholders 321
Underlying earnings per share 20.20
Restated year to 31 December 2000
£m £m Pence
Profit before taxation 166
Profit attributable to ordinary shareholders 79 5.07
Exclude:
Net loss on sale of businesses 78 78 5.01
Loss on sale of fixed assets * 1 1 0.06
Amortisation of goodwill 46 46 2.95
Restructuring of acquired businesses 16 16 1.03
Exceptional rationalisation 9 9 0.58
Energy - exceptional charge 120 120 7.70
Related tax effect - (47) (3.02)
Underlying profit before taxation 436
Underlying profit attributable to shareholders 302
Underlying earnings per share 19.38
Diluted basic earnings per ordinary share are calculated by dividing the profit
attributable to ordinary shareholders of £106m (2000 £79m) by 1,616 million
(2000 1,566 million) ordinary shares, being 1,589 million (2000 1,558 million)
as above adjusted by the bonus element of existing share options of 27 million
(2000 8 million).
4. Group employees at the period end
31 December 31 December
2001 2000
Number Number
Civil Aerospace 23,900 24,500
Defence 6,700 7,300
Marine Systems 6,500 6,500
Energy 4,900 5,300
Financial Services 200 100
Businesses disposed
42,200 43,700
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 maximum gross and net 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.
At December 31, 2001, the total gross liabilities in respect of financing
arrangements on all delivered aircraft, less amounts insured and related
provisions, amounted to £857m (2000 £766m), of which £78m (2000 £101m) relates
to sales financing support provided to joint ventures. Taking into account the
estimated net realisable value of the relevant security, the net contingent
liabilities in respect of these financing arrangements amounted to £206m (2000
£184m). If the value of the relevant security was reduced by 20%, a net
contingent liability of approximately £283m (2000 £347m) would result.
Provisions of £82m are carried forward in respect of customer financing
exposures
6. FRS 17 - Post retirement benefits
The Group is required to adopt FRS 17 fully by 2003. For 2001 accounts certain
disclosures are required including the value of pension scheme assets and
liabilities under the new rules laid down by FRS 17. On this basis, at December
31, 2001, and after taking account of deferred taxation, there was a net
shortfall of assets over respective liabilities amounting to £284m in respect of
UK schemes. This deficit represents 6% of assets under management and has been
assessed at a point in time when equity markets are depressed and discount rates
are low, both of which have a material impact on the net surplus / deficit of
the schemes. The shortfall on overseas schemes amounted to £113m, which is fully
covered by existing provisions on the balance sheet.
There is no impact on funding requirements for 2002. The Group's funding
requirements for the schemes is derived from tri-annual actuarial valuations,
the next of which is due in 2003. Any adjustment to the current contribution
rate will depend upon the predicted performance of the pension fund assets and
liabilities at that point. In contrast, under FRS 17 a snapshot is taken of
pension fund assets and liabilities at a specific point in time. Thus,
movements in equity markets and discount rates are expected to create volatility
in the calculation of scheme assets and liabilities. For example, a 15 per cent
improvement in equity markets or a one per cent increase in discount rates would
have the effect of eliminating the deficit recorded in the 2001 accounts.
7. Preliminary results
The financial information above does not constitute the Group's statutory
accounts for the year ended December 31, 2001 or 2000. Statutory accounts for
2000 have been delivered to the Registrar of Companies, whereas those for 2001
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.
This information is provided by RNS
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