The Group conducts business on a global basis and has customers in 120 countries. It is this broad customer base, coupled with an extensive product and services portfolio, which underpins our success. We have continued to grow our order book in 2010 to £59.2 billion. Underlying profits before tax increased by four per cent to £955 million.
We are proposing a final payment to shareholders of 9.6 pence per share, bringing the full year payment to 16 pence per share. This is an increase of 6.7 per cent and reflects the Board’s continuing confidence in the Group’s business.
International trade tensions, uneven growth, fiscal tightening and currency instability have combined to make the economic environment uncertain. In these circumstances it is important to have a balanced business portfolio. This Annual report records that our three businesses outside civil aerospace – marine, defence aerospace and energy – have all grown underlying profits at double digit rates during 2010, adding to the resilience of the business.
We continue to benefit from the high barriers to entry which are a consequence of our long-term investments and the businesses in which we are involved. Our high-technology products and services require sophisticated systems integration and are hard to replicate. We continuously explore new ways in which technologies developed in one part of our business can be applied in others, reinforcing this strong market position.
As well as meeting the challenges of the marketplace in 2010, Rolls-Royce has had to manage the high profile failure of a Trent 900 engine on a Qantas Airbus A380. Rolls-Royce behaved as you would expect of a highly proficient engineering company. We identified the problem quickly, and applied ourselves to the swift return of the fleet to normal operation. I would like to thank our customers for their support, and recognise the tremendous efforts of Rolls-Royce management and staff in responding so professionally to this very regrettable incident. The safety of our products has always been, and always will be our first priority.
We are committed to conducting business to the highest standards, and to enriching the societies in which we live and work. As well as creating employment and generating wealth, we invest heavily and consistently in improving the environmental performance of our products. Through our own research, and in collaboration with universities around the world, we are driving innovation and extending the boundaries of human knowledge. Our training programmes raise levels of skills and capability and set new standards of engineering excellence. Rolls-Royce people around the world are directly involved in community projects and voluntary activities, contributing to the communities in which we operate.
This year we took further steps to embed our Global Code of Business Ethics. Rolls-Royce is a responsible Group and we are committed to ensuring that we conduct business appropriately and to the highest levels of integrity. In order to ensure that we achieve best practice, our procedures and training programmes are continually reviewed and involve all our employees.
We have continued to invest in our own people through training and development programmes. These programmes operate worldwide, including from dedicated training facilities in the UK and US. These facilities are used to run a range of programmes for our worldwide workforce and for our customers. The Board is committed to improving our environmental performance across all business sectors. Continuous investment in the gas turbine engine, the core product for
Rolls-Royce, has progressively improved fuel efficiency and will continue to do so. The new
Trent XWB for example will be 16 per cent more fuel efficient than the first Trent aero engine to enter service 15 years ago. This means less cost for our customers as well as lower emissions. The application of gas turbines and efficient diesel engines in the marine sector also offers the possibility of significant reductions in emissions at sea. As well as developing core technologies, the Company is exploring other low carbon energy sources including civil nuclear power, fuel cell technology and tidal power.
In 2011, we are proposing to introduce a new holding company for the Group. This will enable us to continue our progressive shareholder payment policy and provide cash returns to shareholders in the most efficient manner through the issue and redemption of C Shares.
Rolls-Royce supports a wide range of charitable causes with particular emphasis on the armed forces benevolent funds and educational programmes involved with science and engineering.
This year’s Rolls-Royce Science Prize was won by a team from Teesdale School, County Durham for their design project to enhance the lives of animals in their local zoo. They received their award of £20,000 from John Rose at an awards dinner attended by senior industry leaders, academics and government ministers. The Science Prize attracts entrants from thousands of schools across the UK.
I would like to thank all our management and employees very much for their loyalty and hard work during the past year. Our results are a testament to the focus and commitment I see demonstrated in every part of the business and at all levels of the organisation. I am constantly impressed by the initiative shown by Rolls-Royce people in seizing opportunities and responding to the needs of our customers.
Once again the Company benefited from the wise counsel of the International Advisory Board
(IAB) during 2010. This Board, whose membership is set out later in this report, was established in 2006 to help provide a broad perspective on issues such as global political developments, business risks and opportunities and economic trends. The advice they give is extremely valuable to us as we develop our global footprint and become more international in our outlook and behaviour. I would like to thank the members of the IAB for their work during the year in providing such high-level strategic advice.
I would also like to thank my fellow directors for their superb support and hard work over the
There is of course one very important tribute to be paid by the Board and everyone else in
Rolls-Royce to our Chief Executive, John Rose, who has announced his decision to retire at the end of March this year. John has been Chief Executive for 15 years, during which time he has done the most extraordinary job. He has transformed Rolls-Royce into a world-class company operating on a global stage. His strategic vision has led to the construction of a resilient business with a powerful portfolio of internationally competitive products and services. His leadership and tenacity have helped establish a platform from which we expect revenues to double in the decade ahead. We owe John a huge debt of gratitude for what he has done for the Company, not only as Chief Executive, but during his career of 27 years with Rolls-Royce.
John has also been a driving force in public policy, championing the cause of high value added manufacturing and services. He argued for the importance of rebalancing the UK economy long before it became fashionable to do so. I am sure he will continue to be a powerful advocate for the importance of science, technology and maths, and of the importance of technical education in a nation’s ability to generate wealth.
John Rose will be succeeded as Chief Executive by John Rishton, who is currently the Chief Executive Officer of the Dutch based, global retail group Royal Ahold. John Rishton has been a member of the Rolls-Royce Board for four years. As well as knowing Rolls-Royce well, John has a deep understanding of the aviation industry gained as Chief Financial Officer at British Airways.
He also has manufacturing experience gathered from a number of senior positions at Ford. I have come to know John Rishton well. He is an outstanding individual, with experience as the successful Chief Executive of a global publicly listed company. He is an instinctive team player, and was the unanimous choice of the Board. I am certain he will prove himself a distinguished Chief Executive of Rolls-Royce when he takes up his new role at the end of March this year.
The technologies that Rolls-Royce deploys are at the frontiers of engineering. We continue to invest in the long-term growth of our Company. We enjoy the long-term support of our large customer base and suppliers, and we will continue to broaden our portfolio organically or by acquisition in our core sectors. We intend to maintain a strong balance sheet and a single A credit rating which we believe provides the foundation for the long-term growth of our businesses.
A great company is built by first class, passionate and highly skilled people. We have these in
Rolls-Royce and I believe that we will continue to improve our business and deliver excellent value for all our shareholders.
February 9, 2010
16.00pFull year payment to shareholders