WHO WE ARE OUR BETTER BUSINESSES POWER FOR OUR A CHANGING PRIORITIES WORLD
WHO WE ARE
WE ARE A POWER SYSTEMS AND SERVICES GROUP AIR SEA REVENUE PROFIT £14.6 bn £1.6 bn LAND ORDER BOOK £74 bn
BETTER POWER FOR A CHANGING WORLD OUR VISION IS TO DELIVER BETTER POWER FOR A CHANGING WORLD A CHANGING WORLD BETTER POWER • Growing population and • Cleaner and more global growth creating sustainable energy demand for more power • More fuel-effjcient • Greater affmuence leading systems on land, to greater mobility at sea and in the air • Climate change driving • Helping customers demand for lower emissions to do more using less LEADING INNOVATION LEADING TECHNOLOGY £1.2 BILLION TRENT XWB invested in research and World’s most efficient large aero engine development annually MTU POWERPACKS MORE PA TENTS Among the most advanced in the filed annually than any rail industry, meeting all the latest other UK company EU regulations on emissions Trent XWB UT DESIGN SERIES 15,500 In service on the A350. Global benchmark for offshore engineers Over 1,500 engines on order. oil industry: wave-piercing hull 31 to improve efficiency and reduce fuel consumption university technology partnerships
HOW WE ARE STRUCTURED AEROSPACE LAND & SEA RECIPROCATING GAS TURBINES NUCLEAR ENGINES CIVIL DEFENCE POWER MARINE NUCLEAR AEROSPACE AEROSPACE SYSTEMS CUSTOMER SERVICES
COMPLEMENTARY TECHNOLOGIES AND BUSINESS CYCLES AEROSPACE LAND & SEA RECIPROCATING GAS TURBINES NUCLEAR POWER SOURCE ENGINES LARGE & GLOBAL LARGE & GLOBAL GLOBAL CUSTOMER BASE HIGH MEDIUM/HIGH HIGH BARRIERS TO ENTRY HIGH INVESTMENT REQUIRED LOW/MEDIUM LOW/MEDIUM 5-20 YEARS 2-8 YEARS 20 YEARS DEVELOPMENT TIME 20+ YEARS 40+ YEARS 40+ YEARS PRODUCT LIFE SUBSTANTIAL GROWING GROWING SERVICE OPPORTUNITY AND GROWING
BENEFITS OF A BALANCED PORTFOLIO COMMERCIAL Different business and investment cycles support strong balance sheet Scale provides resilience and helps to fund R&D Breadth increases market access INDUSTRIAL STRATEGIC High technology and advanced Address attractive, long-term markets engineering applied across where growth is driven by increasing the Group population, affmuence and trade Deep understanding of materials, Rising environmental standards and electronics, data management demanding operating conditions play and services to our strengths Whole systems integration We invest with confjdence because of our deep understanding of customer requirements
A ROBUST AND LONG-TERM GROWTH BUSINESS REVENUE PROFIT 36 % 25 % 36 % 25 % 11 % 25 % 28 % 64 % 75 % 75 % 89 % 10 % CAGR 16 % CAGR 2004: £ 5.9 bn 2014: £ 14.6 bn 2004: £ 0.4 bn 2014: £ 1.6 bn Aerospace Land & Sea BALANCED REVENUE STREAMS 52 % ORIGINAL 48 % CUSTOMER EQUIPMENT SERVICES
AEROSPACE CIVIL AEROSPACE DEFENCE AEROSPACE LAND & SEA POWER SYSTEMS MARINE NUCLEAR OUR BUSINESSES
CIVIL AEROSPACE OVERVIEW GROWTH DRIVERS MARKET OUTLOOK • 13,000 engines in service • Continuous investment • Global market for powering 35 aircraft types in applied R&D allows equipment and services us to maintain strong estimated at $1,900 billion • Leading engine supplier market position over next 20 years in widebody aircraft and large corporate • Requirement for quieter, • Growth in engine jet markets more fuel-effjcient deliveries drives $650 engines which billion services market • Trent engine on most reduce emissions over next 20 years major new twin-aisle aircraft programmes • Increasing demand for • More than 90% of Trent travel in emerging markets engines covered by long- and requirement for more term service agreements fuel-effjcient aircraft REVENUE REVENUE BY MARKET REVENUE MIX Advance and UltraFan £6,837m Our civil aero engine designs of the 61 % 54 % 39 % 48 % 52 % future will incorporate new CTi carbon and titanium fan blades to deliver Large engines Original Equipment significant weight savings. PROFIT Customer Services Small & medium £942m engines
DEFENCE AEROSPACE OVERVIEW GROWTH DRIVERS MARKET OUTLOOK • World’s second largest • Long-term requirement • Equipment market supplier of defence for global security worth up to $150 billion aero engines over next 20 years • Leading position in • Presence in all major military transport aircraft • Services market sectors – transport, worth up to $250 billion • Requirement for combat, trainer, over next 20 years innovative solutions to helicopters and customer service needs • Customer demand unmanned aerial for greater capability vehicles (UAVs) will drive growth • 16,000 engines in in services service with more than 160 military customers in over 100 countries REVENUE REVENUE BY MARKET REVENUE MIX Vertical technology £2,069m Our LiftSystem for the STOVL version 51 % 39 % 10 % 39 % 61 % of the F-35 Joint Strike Fighter delivers 40,000 lbs of downward thrust. Transport Original Equipment PROFIT & Development Combat £366m Customer Services UAV/Trainer
POWER SYSTEMS OVERVIEW GROWTH DRIVERS MARKET OUTLOOK • World leader in fuel- • Major growth potential • Total market for effjcient, high-speed in fuel-effjcient engines reciprocating engines diesel technology for marine and estimated at £500 billion power markets over next 20 years • Specialises in reciprocating engines • Opportunities for • Scope to increase service for land and sea power technology transfer revenues from customer applications and collaboration with care agreements Marine business • 800,000 power systems • Services market worth in service across marine, • Revenue growth up to £150 billion over industrial, rail, defence, supported by extensive next 20 years off-road and energy distribution network markets and broad market presence REVENUE REVENUE BY MARKET REVENUE MIX Piston power £2,720m 20 % 28 % Our MTU product range is a world-leader 39 % 13 % 70 % 30 % in diesel and gas engines for land and sea applications. Marine Original Equipment PROFIT Industrial Customer Services £253m Energy Defence/other
MARINE OVERVIEW GROWTH DRIVERS MARKET OUTLOOK • 4,000 customers • Long-term requirement • Equipment market worldwide with for marine support to worth up to £170 billion equipment installed offshore oil and gas over next 20 years on 25,000 vessels markets • Services market • Strength in three key • Environmental legislation worth up to £80 billion markets – naval, merchant creating need for cleaner over next 20 years and offshore power technologies • Opportunities created by • World’s largest portfolio • Vessel owners benefjt growing but fragmented of power, propulsion, from one supplier of global market complex positioning engine, propulsion and systems and equipment systems from deck equipment bridge to stern REVENUE REVENUE BY MARKET REVENUE MIX Carrier capability £1,709m 22 % 19 % The 33-tonne propellers that will power 59 % 63 % 37 % the Royal Navy’s new Queen Elizabeth class aircraft carriers. Offshore Original Equipment PROFIT Naval Customer Services £138m Merchant
NUCLEAR OVERVIEW GROWTH DRIVERS MARKET OUTLOOK • More than 50 years’ • Security of supply, • Long-term UK MoD experience in nuclear environmental submarine programme industry through UK requirements and rising provides stable, ongoing submarine programme demand drive need for service revenue stream nuclear as part of • Around half the world’s • Civil nuclear equipment energy mix civil nuclear reactors use and services market our services or solutions • Strategic relationships worth £220 billion over with range of reactor next 20 years • Strong global position in designers gives us broad nuclear instrumentation • Reactor support services customer spread across and control systems market potentially valued the world at £140 billion over • Decommissioning 20 years offers long-term growth market potential REVENUE REVENUE BY MARKET REVENUE MIX Nuclear heritage £684m 20 % 6 % Skills and knowledge developed over the 74 % 37 % 63 % past 50 years providing nuclear propulsion for the Royal Navy’s submarine fleet Submarines Original Equipment are being applied to the growing global PROFIT market for civil nuclear power. Civil nuclear/other Customer Services £48m Power generation
IMPORTANCE OF CUSTOMER SERVICES ACROSS GROUP REVENUE MIX THE GROUP 52 % 48 % ORIGINAL SERVICES EQUIPMENT TOTAL SERVICES REVENUE: £7 bn SERVICES REVENUE BY DIVISION 72 % 28 % LAND AEROSPACE & SEA GROWING INSTALLED ADDING VALUE FOR ENGINE BASE CUSTOMERS AND SHAREHOLDERS Drives service revenues We leverage data to improve service CAPTURING THE Provides growth opportunity experience, reduce cost and drive across the Group OPPORTUNITY innovation Long-term service agreements aligns Provides long-term visibility of income interests and deepens our connection with customers We invest in service capability to meet their needs
FIX THE BASICS THE 4Cs CUSTOMER CONCENTRATION COST CASH CHANGE OUR CULTURE STRATEGIC INVESTMENT WIDEBODY AIRCRAFT NARROWBODY AIRCRAFT MEDIUM-SPEED OUR RECIPROCATING ENGINES PRIORITIES
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