Underlying Revenue

Investor Relations | CMD 2016

All figures are for Full Year 2015 unless otherwise stated.

Power Systems Presenters

5% 2015 Group Revenue

2015 Group Revenue

Revenue Breakdown

Population growth and increasing urbanisation are driving rising demands for energy, resources and food and continuous infrastructure developments Current weak environment in certain markets (eg. oil & gas and mining), due to current low oil and commodity price levels Geopolitics and an increasing multipolar world are driving modest defence budget growth (1-2%) in NATO countries with more growth in emerging markets

Business Focus

Market Dynamics

Increasing focus on renewable energy sources requires decentralised and clean energy solutions (eg. continuous gas and back-up power generation solutions) Increasing environmental legislation and efficiency requirements drive emission and efficiency technologies Global GDP development with particular growth in Asia Increasing global and regional trade and transport of goods

Marcus joined Rolls-Royce Power Systems as CFO in 2015. He is responsible for the Corporate Services division including finance, IT-applications, legal and compliance, personnel and facility management. He is also Director of Industrial Relations within the group and a board member of our MTU subsidiary. Formerly, Marcus was CFO of Senvion SE after being SVP Management Control and responsible for the entire financial division of Senvion SE from 2009.

Marcus Wassenberg CFO – Power Systems

Petar joined Rolls-Royce in 2012 and became Director of Product Management in 2014. His responsibility covers all reciprocating engine product lines. Prior to Rolls-Royce Petar was with MAN Diesel & Turbo for six years, where his final position was head of Product Strategy. He holds a doctoral degree in engineering, an MBA with focus on Corporate Strategy and a Diploma in Industrial Engineering.

Petar Pelemis Director Product Management – Power Systems

MTU One of the leading manufacturers of large diesel engines and complete propulsion and drive systems for marine applications, for heavy land, rail and defence vehicles, and for the oil and gas industry

18% 68%

32%

OE

Services

37%

21%

30%

12%

Defence/Other

Marine

Industrial

Energy

£2.4bn

LTSA* 2%

T&M 30%

OE 68%

H1 2016 Figure

Employees Historic Revenue & Profit

10,600* Order Book

£2.0bn

£2,831m £2,720m £2,385m

£294m £253m £194m

2013 2014 2015

MTU Onsite Energy Standardised and tailor-made diesel gensets for emergency, base load and peak load power generation and for cogeneration plants for the generation of combined heat and power based on gas engines and gas turbines

Bergen Medium-speed Rolls-Royce engines for marine and power generation applications, and for the oil and gas industry

L’Orange Leader in the field of electronically-controlled, high-pressure injection technology for diesel and heavy fuel oil engines in the off-highway sector

£m

2014

Underlying Change

Acquisitions & Disposals

Exchange

2015

Order book 1,971 (43) - - 1,928 Underlying revenue 2,720 (72) - (263) 2,385

Change -3% - -10% -12% Underlying OE revenue 1,893 (97) - (178) 1,618

Change -5% - -9% -15% Underlying services revenue 827 25 - (85) 767

Change +3% - -10% -7% Underlying gross margin 742 (37) - (70) 635 Gross Margin % 27.3% -70bps 26.6%

Commercial and administrative costs (296) (9) - 30 (275) Restructuring costs (7) 3 - - (4) Research and development costs (183) 3 - 18 (162) Joint ventures and associates (3) 3 - 0

Underlying profit before financing 253 (37) - (22) 194 Change -15% -23%

Underlying operating margin 9.3% -110bps 8.1%

www.rolls-royce.com www.facebook.com/RollsRoyceGroup

@RollsRoyce All figures are for Full Year 2015 unless otherwise stated.

This newsletter is for informational purposes only, it is not intended to contain any new material or non-public information relating to Rolls-Royce plc but is a summary of recent public announcements and as such may not be relied on. Nothing in this document should be construed as a profit forecast, however it may repeat certain statements that might be deemed to be forward-looking; such statements are made under the provisions of Rolls-Royce’s Safe Harbour Statement which can be found as part of our presentation materials on Rolls-Royce’s website http://www.rolls-royce.com/investors/results-centre

*FY15 Average

*Long Term Service Agreement

Power Systems – Engineering Excellence • Product development driven by customer

demand for improved life-cycle cost and continuously tightening emissions requirements

• Taking a focused approach on existing product portfolio investment

• Investing / innovating to maintain technology leadership and create additional customer value

Life-cycle cost profile Emissions regulation forecast: 2025

Focus on high quality reciprocating engine portfolio

Continuous operation applications

Expanding gas engine portfolio

Strengthening integrated system capabilities

High

Medium nationwide / high in urban areas

Medium

No legislation Acquisition cost Maintenance cost Operation cost

Ensuring high quality new engine development • Investing in new engine series to secure

technology leadership

Maintaining a clear market-led focus • Focusing on key growth markets • Responding to customer requirements

Pursuing modularised R&D approach • Accelerating development time • Increasing investment effectiveness

Increasing relevance of gas engines

Maximising returns on R&D investment by applying proven gas technology for new applications in existing markets

Creating value through systems integration • Compliance with

stricter emission regulations

• Low gas prices • Improved gas

infrastructure

• Optimising customer life-cycle cost

• Improving performance and emissions footprint

• Potential for greater data capture and analysis

Technology approach to emissions legislation: