© Rolls-Royce plc 2008 Legal Information

Services

The Group's underlying service revenues continued to grow strongly in 2007, increasing nine per cent to £4.3 billion. Services account for 55 per cent of Group revenues, with long-term TotalCare agreements now representing the majority of our business in the civil aerospace sector.

Our services range from the provision of field support, shop maintenance and logistics solutions to data management and engine leasing, delivered through a global network of service providers, wholly owned, and joint venture facilities. Rolls-Royce and joint venture facilities employ over 8,000 people with major locations in the UK, Europe, the Americas and Asia. The service delivery organisations are managed through our operations centres which plan the flow of work and manage the day-to-day activities.

Our relationships with our customers are at the heart of our services strategy. TotalCare, our preferred contracting model, aligns our interests with those of our customers and provides an incentive for Rolls-Royce to build and drive improvement in the services supply chain.

We frequently work closely with our customers in building service delivery capability and we have recorded a number of milestones this year: HAESL, our joint venture in Hong Kong with HAECO of the Swire Group, celebrated its tenth year of operations and the opening of its latest facility extension in December 2007; SAESL, our joint venture with Singapore Airlines, delivered its 500th engine; and TAESL, our joint venture with American Airlines, its 1,500th engine. We continue to build on this successful model and N3, which is a joint venture with Lufthansa Technik in Germany, and our newest repair and overhaul centre, opened for business in March 2007.

One of the ways we measure our progress in implementing our service strategy is by reference to the percentage of the installed base of delivered engines subject to TotalCare or similar agreements. During 2007, Singapore Airlines and Emirates converted their Trent service contracts to TotalCare. Such decisions and deliveries of new engines subject to TotalCare have increased the civil engine fleet under management to 55 per cent, up from 48 per cent last year. This trend is set to continue, with 77 per cent of future Trent civil deliveries subject to TotalCare agreements.

In our other sectors the penetration of TotalCare is lower but we continue to record significant wins. The UK MoD and US DoD are committed to through-life contracting as the means by which they intend to secure service support from industry. Of particular note last year was the award by the UK MoD of a £1 billion contract covering the support of powerplant systems for the UK's nuclear submarines.

In the energy sector, BP has entered into a second TotalCare contract. Following on from the success of the North Sea contract, Rolls-Royce will now manage the 28 RB211s operated by BP in Azerbaijan.

We continue to invest in upgrading and expanding our service capability. During 2007, we opened an Operations Centre in Dahlewitz, Germany, to support our corporate and regional aircraft operators and a new flow line in Ansty, UK, to repair RB199 and EJ200 modules. We also implemented a new spare parts forecasting system.

Standardised tools and processes are one of the ways in which we seek to control costs. We are deploying SAP across the repair and overhaul network, successfully migrating our parts service centres, Rolls-Royce Canada and N3 to our global template during 2007.

In the marine sector, new service workshops have been opened and we acquired Seaworthy Systems Inc. to enable us to develop a new TotalCare service for naval customers, which will guarantee complete propulsion plant support and power availability.

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