The directors present their report and the audited financial statements of Rolls-Royce Group plc (the Company) and its subsidiaries (together referred to as the Group) for the year ended December 31, 2005.
Rolls-Royce is a global business providing power systems for use on land, at sea and in the air. The Group has a balanced business portfolio with leading positions in the civil and defence aerospace, marine and energy markets. There are some 54,000 Rolls-Royce gas turbines in service and they generate a demand for high-value services throughout their operational lives. Rolls-Royce is a technology leader employing 36,200 people in offices, manufacturing and service facilities in 50 countries.
Results for the year and the issue of B Shares
The Chairman's statement, the Chief Executive's review and the Finance Director's review describe the year's operations, research and development activities and prospects.
At the Annual General Meeting (AGM) on May 3, 2006, the directors will recommend an issue of 53.8 B Shares with a total nominal value of 5.38p for each ordinary share. Together with the interim issue on January 3, 2006 of 33.4 B Shares for each ordinary share with a total nominal value of 3.34p, this is the equivalent of a total annual payment to ordinary shareholders of 8.72p for each ordinary share.
Shareholders are given the opportunity to redeem their B Shares for cash or to convert them into additional ordinary shares in the Company. For those shareholders who have not elected to redeem or convert their B Shares, a B Share dividend at a rate of 75 per cent of the London Interbank Offered Rate (LIBOR) is payable half yearly in arrears.
The Board believes that there continues to be a significant benefit to be gained from the issue of B Shares. Payments to shareholders will, therefore, continue to be made through further issues of B Shares, generally in January and July each year.
After making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.
The following shareholder has a notifiable interest in the Company's ordinary shares at February 8, 2006:
|% of issued ordinary
Authority to purchase own shares
At the AGM in 2005 the Company was authorised by shareholders to purchase up to 173,313,853 of its own ordinary shares representing ten per cent of its issued ordinary share capital as at February 9, 2005. The Company did not make use of this authority during 2005.
The authority for the Company to purchase its own shares expires at the conclusion of the AGM in 2006 and a resolution to renew it will be proposed at that meeting.
A resolution to reappoint the auditors, KPMG Audit Plc, and to authorise the directors to determine their remuneration, will also be proposed at the AGM.
In line with its established policy, the Group made no political donations during 2005.
The directors' biographical details, including their other significant commitments, are set out on the board of directors page. During the year there were a number of Board changes: Simon Robertson was appointed non-executive Chairman with effect from January 1, 2005; Iain Conn was appointed as an independent non-executive director with effect from January 20, 2005; Sir Robin Nicholson retired as the Company's senior independent director on February 9, 2005 and as a non-executive director, at the conclusion of the AGM on May 4, 2005; Peter Byrom succeeded him as the senior independent director; Dr Mike Howse retired as an executive director on June 30, 2005; and Colin Smith was appointed as an executive director of the Company on July 1, 2005. Colin Green will retire from the Board as an executive director on April 4, 2006.
Under the Company's Articles of Association, one third of the directors are subject to re-election every year, with each director also being subject to re-election at intervals of not more than three years. Any director appointed during the year is separately required to retire and seek re-election by the shareholders at the next AGM. The Board also requires any non-executive director who has served on the Board for more than nine years to be subject to annual re-election at the AGM. The directors retiring at this year's AGM are Peter Byrom, Sir John Rose, Colin Smith, Ian Strachan and Carl Symon. They all offer themselves for re-election.
The Company has entered into separate Deeds of Indemnity in favour of its directors. The deeds provide substantially the same protection as that already provided to directors under the indemnity in Article 170 of the Company's Articles of Association. The Company has also arranged appropriate insurance cover for any legal action taken against its directors.