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Rolls-Royce Holdings plc
Annual Report 2016
Front cover
A Trent 1000 engine being
assembled at our Seletar
plant in Singapore.
This page
A Trent XWB, the world’s
most efficient large
aero engine.
Rolls-Royce is a pre-eminent
engineering company focused
on world-class power and
propulsion systems.
Rolls-Royce Holdings plc Annual Report 2016 FINANCIAL HIGHLIGHTS AND CONTENTS
Financial highlights
FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements. Any statements that express forecasts,
expectations and projections are not guarantees of future performance and guidance may be
updated from time to time. This report is intended toprovide information to shareholders,
and is not designed to be relied upon by any other party or for any other purpose, and the Company
and its Directors accept no liability to any other person other than that required under English law.
Latest information will be made available on the Group’s website. Bytheir nature, these statements
involve risk and uncertainty, and a number of factors could cause material differences to the
actual results or developments.
* All figures in the narrative of the Strategic Report are underlying unless otherwise stated.
Underlying explanation is in note 2 onpage131.
ORDER BOOK
£79,810m
2015: £76,399m
FREE CASH FLOW
£100m
2015: £179m
UNDERLYING* PROFIT BEFORE TAX
£813m
2015: £1,432m
REPORTED (LOSS)/PROFIT BEFORE TAX
£(4,636)m
2015: £160m
UNDERLYING* REVENUE
£13,783m
2015: £13,354m
REPORTED REVENUE
£14,955m
2015: £13,725m
UNDERLYING* EARNINGS PER SHARE
30.1p
2015: 58.7p
REPORTED EARNINGS PER SHARE
(220.1)p
2015: 4.5p
FULL YEAR PAYMENT TO SHAREHOLDERS
11.70p
2015: 16.37p
NET DEBT
£(225)m
2015: £(111)m
Contents
STRATEGIC REPORT
Group at a glance 2
Chairman’s statement 4
Chief Executive’s review 6
Introduction 6
Review of 2016 7
Priorities for 2017 13
Business model 14
Financial summary 16
Business review 18
Financial review 36
Sustainable business 40
Key performance indicators 46
Principal risks 48
Going concern and viability statements 53
DIRECTORS’ REPORT
Board of Directors 54
Chairman’s introduction 58
Corporate governance 59
Committee reports 67
Nominations & Governance Committee 67
Remuneration introduction 72
Remuneration policy 76
Directors’ remuneration report 83
Audit Committee 96
Safety & Ethics Committee 103
Science & Technology Committee 110
Responsibility statements 113
Other statutory information 186
FINANCIAL STATEMENTS
Financial statements contents 114
Group nancial statements 115
Company nancial statements 167
OTHER INFORMATION
Subsidiaries, joint ventures and associates 170
Independent auditor’s report 176
Sustainability assurance statement 183
Additional nancial information 184
Other statutory information 186
Shareholder information 190
Glossary 192
STRATEGIC REPORT
Rolls-Royce Holdings plc Annual Report 2016 STRATEGIC REPORT GROUP AT A GLANCE
Group at
a glance
ENGINEERS (YEAR END)
16,526
GROSS R&D EXPENDITURE
£1.3bn
ORDER BOOK
£79.8bn
PATENTS APPLIED FOR
672
EMPLOYEES (YEARAVERAGE)
49,900
COUNTRIES
50
The Group is organised into five
customer-facing businesses:
CivilAerospace, Defence
Aerospace, PowerSystems,
Marine and Nuclear.
UNDERLYING REVENUE
£13,783m
UNDERLYING PROFIT BEFORE FINANCING
£915m
UNDERLYING REVENUE MIX
GROUP
Civil Aerospace 51%
Defence Aerospace 16%
Power Systems 19%
Marine 8%
Nuclear 6%
Our award-winning Unied Bridge is the
result of detailed studies of how crews
use the equipment on the bridge, making
the vessel safer and easier to operate.
GROUP AT A GLANCE Rolls-Royce Holdings plc Annual Report 2016 GROUP AT A GLANCE
CIVIL AEROSPACE
UNDERLYING REVENUE
£7,067m
UNDERLYING PROFIT BEFORE FINANCING
£367m
UNDERLYING REVENUE MIX
PAGES  TO  FOR MORE INFORMATION
DEFENCE AEROSPACE
UNDERLYING REVENUE
£2,209m
UNDERLYING PROFIT BEFORE FINANCING
£384m
UNDERLYING REVENUE MIX
PAGES  TO  FOR MORE INFORMATION
UNDERLYING REVENUE
£777m
UNDERLYING PROFIT BEFORE FINANCING
£45m
UNDERLYING REVENUE MIX