Rolls-Royce, whose military engine business is based at Patchway, Bristol, has had its best-ever year with record underlying revenues and profits. The company, whose commercial engines business is based in Derby, today reported a 21% rise in pre-tax profits to £1.18bn for 2011.
Chief executive John Rishton said that at the year-end the group had a record order book, record underlying revenue and record underlying profit. "We continue to benefit from a broad portfolio, a large and growing customer base and access to markets where demand remains strong for our products and services," he said. "Our order book gives us good visibility of future revenues and demonstrates the confidence our customers have in us.
He added that there are also opportunities for future profitable growth across the group's portfolio. In particular, the joint acquisition of German industrial engine maker Tognum, in partnership with Daimler, adds significantly to the breadth of the R-R portfolio and will accelerate growth.
Mr Rishton continued: "For 2012 we expect good growth in both underlying revenue and underlying profit with cash flow around breakeven as we continue to invest in future growth."
Highlights for 2011 include:
- Record order book of £62.2bn, up 5%.
- Record underlying revenue of £11.3bn, up 4%.
- Record underlying profit before tax of £1.16bn, up 21%.
- Full year payment to shareholders of 17.5p per share, up 9%.
- Joint acquisition of Tognum with Rolls-Royce investing £1.5bn.
- Proposed restructuring of International Aero Engines (IAE) and sale of share holding.
Mr Rishton said the record results had been achieved despite the financial crisis of 2008, recessions in Europe and the US and significant economic and social turmoil. He said: "We have doubled our revenues within the past decade and expect to double them again in the coming 10 years through organic growth alone. To fulfil our record order book, we continue to invest in operational capacity. During 2011, we opened a major new facility at Crosspointe, in Virginia US, where we are now manufacturing gas turbine discs. We completed the construction of a 65,000 sq metre facility at Seletar in Singapore where, for the first time outside the UK, we will manufacture wide-chord fan blades and assemble and test Trent engines. We also continued to add to our network of Marine service centres during the year, opening or expanding sites in the Netherlands, Poland, Namibia, Germany and Hong Kong.
"These investments and others across the portfolio add to our capacity and increase productivity. Close collaboration with our suppliers is critical to our continued success. Around 70% of our manufacturing is conducted within our supply chain. Our partners and suppliers are also investing significantly to deliver future growth and improve productivity. During 2011, we took three strategic actions that will further strengthen our position and underpin long-term growth. The first was our acquisition of the German industrial engines group Tognum, that we made in a joint offer with Daimler. It brings together highly complementary product and technology portfolios and creates significant new opportunities for our Marine and Energy businesses. Second, we signed an exclusive deal to develop an enhanced Trent XWB that will power the long-range Airbus A350-1000 aircraft. Third, we agreed to sell our equity stake in IAE to Pratt & Whitney, at the same time announcing our intention to form a new joint venture to develop engines for the next generation of mid-size aircraft. This agreement builds on a long and successful partnership with Pratt & Whitney in this segment and charts a clear course for our future in this important market."
He said the defence business performed well despite the pressure on defence spending in Europe and the US. Development of the LiftFan system for the F-35 Lightning II Joint Strike Fighter (JSF) continued to make good progress during intensive flight tests that included multiple take offs and vertical landings on board the aircraft carrier USS Wasp. The TP400 engine for the Airbus A400M is on course to enter service in 2013. While the underlying profit generated by the Marine business was broadly flat, original equipment (OE) revenue failed to meet the group's expectations as some offshore customers deferred investment decisions beyond 2011.
Set against this, revenue from services grew strongly as the business benefited from the expansion of its network of service centres and the growth of the fleet equipped with our systems. During the year, R-R received an order to power a further 10 US Navy Littoral Combat Ships, its largest ever surface fleet order. It also secured the first orders for its award winning Environship, a cargo vessel powered by liquid natural gas.
In Energy, underlying profit fell, primarily due to our investment in Civil Nuclear and revenues declined, reflecting weak demand for gas turbine power generation. However, strong demand from the oil and gas industry drove a significant increase in the order book. This included our biggest ever single contract, to supply Petrobras, Brazil's leading oil company, with 32 gas turbine power generators for its offshore operations.
