Marine

Rolls-Royce has a world-leading range of capabilities in the marine market, encompassing the design, supply and support of power and propulsion systems. We are leaders in the integration of technologically complex, mission critical systems for offshore oil and gas, merchant and naval vessels.

Rolls-Royce has more than 2,500 marine customers and has equipment installed on over 30,000 vessels worldwide, including those of 70 navies.

The marine business had another strong year, despite lingering macroeconomic uncertainty and a sluggish recovery in new shipbuilding activity. Service opportunities continued to increase as a result both of the large number of vessels incorporating Rolls-Royce equipment entering the market in recent years, and our expanding services network.

Revenues proved to be resilient in 2010 despite a slowdown in original equipment orders. Growth was driven by our aftermarket services and ongoing success in the offshore market. As a result, marine profit has increased by 26 per cent in 2010.

Offshore

The design of offshore vessels and the high-technology equipment they employ, is central to our business today, and we continued our strong performance in this sector. This was largely based on the success of our specialist UT Design vessels and ability to integrate sophisticated systems into complex ships. The latter part of 2010 saw a slight rebound in orders for highly specialised offshore vessels, highlighted by the first order for the innovative UT 790 wave-piercing series. This new design improves stability and crew safety, while minimising environmental impact.

During 2010, we completed the acquisition of ODIM. The advanced automated handling solutions ODIM brings to our marine business has further extended our capabilities in the range of vessels and equipment we supply to support oil and gas customers in areas such as seismic surveys, deepwater installation, well intervention and other subsea operations.

As the oil and gas industry continues to explore ever deeper waters, the capabilities that the business now has in these highly-skilled areas will mean that we continue to be a strong partner for our offshore exploration and production customers.

Naval

Our naval business had a strong year, with significant activity in the UK, the US and South Korea. In early 2011, we received an order from Lockheed Martin for the provision of MT30s, the world’s most powerful gas turbine, together with Kamewa waterjets, to power a further ten US Navy Littoral Combat Ships. This is the largest surface fleet order ever achieved by Rolls-Royce. We continued to deliver power and propulsion equipment for the UK’s new Queen Elizabeth class aircraft carriers.

Merchant

We invest in technology that addresses the need for more efficient marine power and propulsion systems. This is primarily through the reduction of exhaust gas emissions and improvements in ship design. Our Bergen gas engines already surpass International Maritime Organization (IMO) limits for NOx emissions, and several orders for these cleaner engines were secured for specialist coastal vessels and ferries in 2010.

We believe that our strong focus on environment and safety technology will be increasingly attractive to customers, resulting in new business opportunities in the merchant and specialist vessel sector.

Services

Our services revenues grew by 11 per cent in 2010, now representing 34 per cent of total marine revenue, and we have continued to develop both capacity and capability to realise the significant opportunity that our increasing installed base represents.

Our global pool of service engineers increased by 20 per cent during the year and we have further extended our service centre network with four facilities across Europe and Africa being expanded or opened.

We have enhanced our range of equipment upgrades and successfully introduced an innovative underwater repair service that reduces vessel downtime and increases our ability to support customers operating in remote locations. In addition, we are continuing to develop equipment health monitoring capabilities, leveraging proven expertise in other Group sectors.

Future

Our strong profit performance in 2010 was a result of delivery of existing orders combined with continued growth in service related activity.

Although new orders in equipment reduced in 2010, there was some recovery in the second half of the year. This, combined with anticipated further growth in services, provides us with good visibility of revenues in 2011.