ANNUAL REPORT 2021
ROLLS-ROYCE HOLDINGS PLC
FRONT COVER IMAGE


INSIDE COVER IMAGE


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PIONEERS OF POWER




ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 1
CONTENTS
STRATEGIC REPORT
GROUP AT A GLANCE.. .................................................................. 2
... POWER SYSTEMS
.................................................................... 30
CHAIR’S STATEMENT..................................................................... 4 ... NEW MARKETS ........................................................................ 32
CHIEF EXECUTIVE’S REVIEW......................................................... 6 SUSTAINABILITY ........................................................................ 34
PURPOSE, VISION AND STRATEGY ................................................ 9 ... TRANSITION TO NET ZERO AND TCFD RECOMMENDATIONS ...... 36
BUSINESS ENVIRONMENT ............................................................13 ... RESPONSIBLE CONSUMPTION ................................................. 44
BUSINESS MODEL ........................................................................ 14 ... PEOPLE AND CULTURE ............................................................ 46
KEY PERFORMANCE INDICATORS .................................................16 ... ETHICS AND COMPLIANCE ....................................................... 51
FINANCIAL REVIEW .....................................................................18 PRINCIPAL RISKS ....................................................................... 52
BUSINESS REVIEW ...................................................................... 26 GOING CONCERN AND VIABILITY STATEMENTS ........................... 58
... CIVIL AEROSPACE ................................................................... 26 SECTION 172 AND STAKEHOLDER ENGAGEMENT ........................... 61
... DEFENCE ................................................................................. 28
GOVERNANCE REPORT
COMPLIANCE WITH THE CODE .................................................... 68 ... AUDIT ..................................................................................... 83
CHAIR’S INTRODUCTION ............................................................. 69 ... REMUNERATION ...................................................................... 87
CORPORATE GOVERNANCE ......................................................... 70 ... REMUNERATION REPORT FOR 2021 ......................................... 95
BOARD OF DIRECTORS ................................................................. 71 ... SAFETY, ETHICS & SUSTAINABILITY ......................................105
COMMITTEE REPORTS ................................................................. 80 ... SCIENCE & TECHNOLOGY .......................................................106
... NOMINATIONS & GOVERNANCE ................................................80 RESPONSIBILITY STATEMENTS .................................................. 107
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS ..................................109 NOTES TO THE COMPANY FINANCIAL STATEMENTS .................... 186
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............ 117 SUBSIDIARIES ...........................................................................190
COMPANY FINANCIAL STATEMENTS ...........................................184 JOINT VENTURES AND ASSOCIATES .......................................... 195
OTHER INFORMATION
INDEPENDENT AUDITORS’ REPORT ............................................ 197 RECONCILIATION OF ALTERNATIVE PERFORMANCE MEASURES .. 215
SUSTAINABILITY ASSURANCE STATEMENT .................................211 DIRECTORS’ REPORT ................................................................. 217
GREENHOUSE GAS EMISSIONS ................................................... 212 SHAREHOLDER INFORMATION ................................................... 220
OTHER FINANCIAL INFORMATION .............................................. 213 GLOSSARY ................................................................................ 222

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CONTENTS
STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 20212
GROUP AT A GLANCE
PIONEERS OF POWER




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












UNDERLYING EARNINGS
PER SHARE
1,2,3
0.11p
2020: (67.48)p
STATUTORY EARNINGS
PER SHARE
1,2
1.48p
2020: (51.81)p
NET DEBT
4
£(5,157)m
2020: £(3,576)m
LIQUIDITY
5
£7.1bn
2020: £9.0bn
UNDERLYING OPERATING
PROFIT/(LOSS)
1,2,3
£414m
2020: £(2,008)m
STATUTORY OPERATING
PROFIT/(LOSS)
1,2
£513m
2020: £(1,972)m
UNDERLYING PROFIT/(LOSS)
BEFORE TAX
1,2,3
£36m
2020: £(3,993)m
STATUTORY (LOSS)
BEFORE TAX
1,2
£(294)m
2020: £(2,799)m
FREE CASH FLOW
1,2,3
£(1,485)m
2020: £(4,255)m
STATUTORY CASH FLOW
£(775)m
2020: £(995)m
UNDERLYING REVENUE
1,2,3
£10,947m
2020: £11,430m
STATUTORY REVENUE
1,2
£11,218m
2020: £11,491m
UNDERLYING REVENUE BY BUSINESS IN 2021
 41%
 31%
 25%
 3%
ORDER BACKLOG
£50.6bn
GROSS R&D EXPENDITURE
3,6
£1.2bn
COUNTRIES WITH
ROLLS-ROYCE PRESENCE
49
EMPLOYEES
(MONTHLY AVERAGE)
44,000
a
c
b
d
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 3
GROUP AT A GLANCE
OUR BUSINESSES IN 2021
UNDERLYING REVENUE
7,8
UNDERLYING REVENUE
8
UNDERLYING REVENUE ⁸ UNDERLYING REVENUE ⁸
£4,536m £3,368m £2,749m £2m
2020: £5,068m 2020: £3,355m 2020: £2,735m 2020: £5m
UNDERLYING OPERATING LOSS
7,8
UNDERLYING OPERATING PROFIT
8
UNDERLYING OPERATING PROFIT ⁸ UNDERLYING OPERATING LOSS ⁸
£(172)m £457m £242m £(70)m
2020: £(2,535)m 2020: £461m 2020: £188m 2020: £(45)m




CIVIL AEROSPACE DEFENCE POWER SYSTEMS NEW MARKETS

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





















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



UNDERLYING REVENUE MIX UNDERLYING REVENUE MIX UNDERLYING REVENUE MIX R&D EXPENDITURE
a
b
c
d
a
b
e
d
c
a
b
d
c
a
b
  72%
 21%
  4%
 3%
  32%
 24%
  19%
 11%
  14%
  33%
 25%
 33%
 9%
  23%
 77%





STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 20214
CHAIR’S STATEMENT
DELIVERING ON OUR
COMMITMENTS

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

ANITA FREW
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 5
CHAIR’S STATEMENT


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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 20216
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WARREN EAST
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 7
CHIEF EXECUTIVE’S REVIEW
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
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
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

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STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 20218
CHIEF EXECUTIVE’S REVIEW

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





















ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 9
PURPOSE, VISION AND STRATEGY
PIONEERING THE POWER
THAT MATTERS
 




























STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202110
PURPOSE, VISION AND STRATEGY
OUR PURPOSE,
VISION AND MISSION

















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
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
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OUR PURPOSE


OUR VISION OUR MISSION
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
OUR VALUES AND BEHAVIOURS
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 11
PURPOSE, VISION AND STRATEGY

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
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
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
A BETTER QUALITY AND
MORE BALANCED BUSINESS









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













STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202112
PURPOSE, VISION AND STRATEGY
OUR STRATEGIC PRIORITIES













C














A
C






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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 13
BUSINESS ENVIRONMENT
BUSINESS ENVIRONMENT
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





















STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202114
BUSINESS MODEL
BUSINESS MODEL


























 










1. 








2. 

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

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

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
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
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
1 2 3 4














DISCIPLINED CAPITAL ALLOCATION



ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 15
BUSINESS MODEL






























GROSS R&D
EXPENDITURE
£1.2bn
2021 TOTAL
SHAREHOLDER RETURN
10.45%
INVESTMENT IN LEARNING
AND DEVELOPMENT
(HOURS)
263,840
SPEND WITH EXTERNAL
SUPPLIERS
£7.9bn
HOURS OF EMPLOYEE TIME
VOLUNTEERED
26,427































5 76

 
 

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 

 
 
 
 
 
 


















STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202116
KEY PERFORMANCE INDICATORS
KEY PERFORMANCE
INDICATORS
FINANCIAL PERFORMANCE INDICATORS
1,2,3







ORDER BACKLOG (£BN) UNDERLYING REVENUE (£M) UNDERLYING OPERATING PROFIT/(LOSS) (£M)
019
018
017
60.9
63.1
50.6
52.9
019
018
017
15,450
15,067
10,947
11,430
2
019
2
018
2
017
808
616
306
2021
414
(2,008)
2020









































CAPITAL EXPENDITURE AS A PROPORTION
OF UNDERLYING REVENUE (%)
SELF-FUNDED R&D AS A PROPORTION
OFUNDERLYING REVENUE (%)
FREE CASH FLOW
FROM CONTINUING OPERATIONS (£M)
2
019
2
018
2
017
5.0
6.0
5.3
2021
2.8
2020
4.8
2
019
2
018
2
017
7.2
7.6
7.6
2021
7.4
2020
7.6
2
019
2
018
2
017
873
568
259
2021
(1,485)
2020
(4,255)




















































ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 17
KEY PERFORMANCE INDICATORS









SUSTAINABILITY




NON-FINANCIAL PERFORMANCE INDICATORS
CUSTOMER METRIC (%) EMPLOYEE ENGAGEMENT (SCORED 1 TO 5)
4
Civil Aerospace
Power Systems
79 73.7
Defence
39 0
40 41.5
2021
2
019
3.73
2020
3.68
3.53
 





























STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202118
FINANCIAL REVIEW
FINANCIAL REVIEW














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PANOS KAKOULLIS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 19
FINANCIAL REVIEW
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STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202120
FINANCIAL REVIEW
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  2021 
  
  
  

  2021 
 513 
 40 
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
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


 2021 
  

  
  
  

– 
 4 
  

 156 
  
  
  
  
  
DEFINING OUR ALTERNATIVE PERFORMANCE MEASURES
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 21
FINANCIAL REVIEW
GROUP STATUTORY RESULTS

 2021

 
   
   
 513  
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   
   
   
   
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




STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202122
FINANCIAL REVIEW





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














      








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
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
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












2021









     
     
     
    
     

    
     

4
    

4
    
    
     
    

    
   –  

  
  
  
  












ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 23
FINANCIAL REVIEW
GROUP UNDERLYING
3
RESULTS

 2021

 




      
      
     
     6 
    
      
      
      
 414     
    
    
 36     
    
 10     
 0.11   






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
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

STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202124
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
 2021  
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   

   
   
   
   
   
  
   
   
   
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   
   
   
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   
   
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
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
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 25
FINANCIAL REVIEW

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


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


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

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




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
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
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
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





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
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

CIVIL AEROSPACE




UNDERLYING REVENUE
1,2
UNDERLYING OPERATING (LOSS)
1,2
ORDER BACKLOG
£4,536m £(172)m £41.1bn
2020: £5,068m 2020: £(2,535)m 2020: £42.4bn
UNDERLYING REVENUE MIX
a
b
  36%
 64%
UNDERLYING REVENUE MIX BY SECTOR
c
d
a
b
 72%
 21%
 4%
 3%
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 27
BUSINESS REVIEW
 


 



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      
      
      
 474    – –
    
     
     
      
      
    
 

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   

2021 

   
   
   
 7.4 6.6 
   
   
 610  
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
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
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202128
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




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


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

DEFENCE




UNDERLYING REVENUE * UNDERLYING OPERATING PROFIT * ORDER BACKLOG
£3,368m £457m £6.5bn
2020: £3,355m 2020: £461m 2020: £7.5bn
UNDERLYING REVENUE MIX
a
b
  42%
 58%
UNDERLYING REVENUE MIX BY SECTOR
a
b
c
d
e
 32%
 24%
 19%
 11%
 14%
 

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 29
BUSINESS REVIEW
 2021


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

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  155   – 
      
      
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    
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     
 
 457 13  461  
    
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 377  
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202130
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
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

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
— 



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—
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
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
— 



—






— 











POWER SYSTEMS



UNDERLYING REVENUE * UNDERLYING OPERATING PROFIT * ORDER BACKLOG
£2,749m £242m £2.8bn
2020: £2,735m 2020: £188m 2020: £2.4bn
UNDERLYING REVENUE MIX
a
b
  63%
 37%
UNDERLYING REVENUE MIX BY SECTOR
c
d
a
b
 33%
 25%
 33%
 9%
 

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 31
BUSINESS REVIEW
 2021



 



       
      
      
   6    
    
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

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
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


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

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

UNDERLYING REVENUE * UNDERLYING OPERATING LOSS * EMPLOYEES (FTE AT YEAR END)
£2m £(70)m >570
2020: £5m 2020: £(45)m
VALUE R&D SPEND £68M
a
b
 23%
 77%
 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 33
BUSINESS REVIEW
 


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   5  
    

 1  –  
    
     
     
     
 
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   
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
STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202134
SUSTAINABILITY
SUSTAINABILITY

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2021 HIGHLIGHTS
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



























OUR SUSTAINABILITY FRAMEWORK
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 35
SUSTAINABILITY






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

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

— 

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

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

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



SDG
PRIMARY CONTRIBUTION
2021 PROGRESS


       


— 

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








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

— 





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
— 
  



— 

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

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

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
   




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

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

UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS




STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202136
SUSTAINABILITY
TRANSITION TO NET ZERO
AND TCFD RECOMMENDATIONS































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
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OUR PROGRESS IN 2021
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 37
SUSTAINABILITY
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





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




— 


— 
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


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

TECHNOLOGY PATHWAY TO NET ZERO

















2019
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STRATEGIC REPORT
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
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




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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 39
SUSTAINABILITY
MANAGEMENT’S ROLE
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 41
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
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
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

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
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

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





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OPPORTUNITY TYPE POTENTIAL IMPACTS OUR RESPONSE
 —  



 —


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


 —  



 
STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202142
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































 


 





ABSOLUTE GHG EMISSIONS (ktCO
2
e)

2021
2
020
2
019
174
2030
0
201
248
448
TARGET
2
014
BASELINE
SHORT AND MEDIUM TERM DECARBONISATION TARGETS
EMISSION TARGET 2021 PROGRESS HIGHLIGHTS




— 

—
 

— 




— 
 

—


—





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

— 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 43
SUSTAINABILITY
TCFD RECOMMENDATIONS



RECOMMENDATION PAGE

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 
B
 

A



B









A
 
B
 





A



B
 



STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202144
SUSTAINABILITY
RESPONSIBLE CONSUMPTION



















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
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 45
SUSTAINABILITY
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






NON-FINANCIAL INFORMATION STATEMENT


RELATED GROUP POLICIES
RELATED PRINCIPAL RISKS
PAGE
ENVIRONMENTAL
MATTERS
—

—

—



EMPLOYEES
—

—

—

—


SOCIAL MATTERS
—


—


HUMAN RIGHTS
—

—

—


ANTI-BRIBERY AND
CORRUPTION
—

—


—


—


— 
— 
— 
ENERGY CONSUMPTION (MWh/£m) TOTAL SOLID AND LIQUID WASTE (t /£m) RECYCLING & RECOVERY RATE (%)
TARGET
2021
2
020
2
019
85
2025
60
98
77
2
014 BASELINE
120
TARGET
2021
2
020
2
019
3.90
2025
3.31
4.46
4.79
2
014 BASELINE
4.42
2021
2
020
2
019
60.8
2025
68
59.6
62.7
TARGET
BASELINE








































STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202146
SUSTAINABILITY
PEOPLE AND CULTURE
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




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
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








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

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





2021 HIGHLIGHTS

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







EMPLOYEES IN 49 COUNTRIES (MONTHLY AVERAGE) *
c
d
f
g
e
a
b
 19,700
 9,500
 5,700
 2,700
 900
  600
 4,900
 
44,000 EMPLOYEES TOTAL (MONTHLY AVERAGE) *
c
d
f
g
e
a
b
 17,900
 11,100
 9,100
 1,400
 400
  100
 4,000
 
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 47
SUSTAINABILITY
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TRI RATE (PER 100 EMPLOYEES)
*
TARGET
2021
2
020
0.43
2025
0.33
0.35
BASELINE
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
STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202148
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 49
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
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
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




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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 51
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
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202152
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PRINCIPAL RISKS

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







STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202154
PRINCIPAL RISKS

   
HOW WE MANAGE PRINCIPAL RISKS
RISK CONTROLS
ASSURANCE ACTIVITIES
AND PROVIDERS OVERSIGHT FORUM CHANGE









—







— 

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

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


—


— 


—



— 

—


— 


— 


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






—


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


— 

— 
— 







      




— 
—


—


— 



— 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 55
PRINCIPAL RISKS
RISK CONTROLS
ASSURANCE ACTIVITIES
AND PROVIDERS OVERSIGHT FORUM CHANGE





       









—




— 



— 
—



— 
—


— 

— 


— 


— 




      








— 



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 

    



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





— 
— 

— 

— 

— 

— 


STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202156
PRINCIPAL RISKS
RISK CONTROLS
ASSURANCE ACTIVITIES
AND PROVIDERS OVERSIGHT FORUM CHANGE






     


     






      



    





     
     

— 
— 





—
  

—


—




— 
— 

— 

— 
— 





     








    


—




—


—


—


—



—



—  — 



        


     

—




—


— 
—


— 



— 

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 57
PRINCIPAL RISKS
RISK CONTROLS
ASSURANCE ACTIVITIES
AND PROVIDERS OVERSIGHT FORUM CHANGE







    




—



—


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


—



— 





—


—


— 
— 

— 





      
     




      



—
   

   


—



—






— 

— 
— 

— 


    



  
    
    

—



—



— 


— 
— 

— 


— 

— 


      

     

—
  


— 
—
  

— 

— 


STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202158
GOING CONCERN AND VIABILITY STATEMENTS
GOING CONCERN STATEMENT


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GOING CONCERN AND
VIABILITY STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 59
GOING CONCERN AND VIABILITY STATEMENTS
GOING CONCERN STATEMENT – CONTINUED
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
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 61
SECTION 172 AND STAKEHOLDER ENGAGEMENT
SECTION 172 AND
STAKEHOLDER ENGAGEMENT
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
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












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

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







STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202162
SECTION 172 AND STAKEHOLDER ENGAGEMENT
CUSTOMERS














EXAMPLES OF ENGAGEMENT WITH OUR KEY STAKEHOLDER GROUPS
PEOPLE









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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 63
SECTION 172 AND STAKEHOLDER ENGAGEMENT

2021
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

— 

— 


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



— 




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


STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202164
SECTION 172 AND STAKEHOLDER ENGAGEMENT




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

— 


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
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
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

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


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


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

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


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— 



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





— 












SUPPLIERS AND PARTNERS









ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 65
COMMUNITIES

















GOVERNING BODIES AND REGULATORS



















INVESTORS




















SECTION 172 AND STAKEHOLDER ENGAGEMENT
STRATEGIC REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202166
SECTION 172 AND STAKEHOLDER ENGAGEMENT


— 

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



— 






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



— 


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

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



— 






— 



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


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


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


— 















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GOVERNANCE REPORT



 


 
 

 


ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021
GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202168
COMPLIANCE WITH THE CODE
COMPLIANCE WITH THE CODE
COMPLIANCE WITH THE UK
CORPORATE GOVERNANCE
CODE 2018
BOARD LEADERSHIP AND
COMPANY PURPOSE
DIVISION OF
RESPONSIBILITIES









































COMPOSITION, SUCCESSION
AND EVALUATION
AUDIT, RISK AND
INTERNAL CONTROL
REMUNERATION
























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



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



ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 69
CHAIR’S INTRODUCTION
CHAIR’S INTRODUCTION





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
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


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GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202170




















CORPORATE GOVERNANCE
CORPORATE GOVERNANCE






























THE BOARD































THE ROLE OF THE BOARD KEY MATTERS RESERVED FOR THE BOARD
THE BOARD COMMITTEES
NOMINATIONS &
GOVERNANCE COMMITTEE
AUDIT
COMMITTEE
REMUNERATION
COMMITTEE
SAFETY, ETHICS &
SUSTAINABILITY COMMITTEE
SCIENCE & TECHNOLOGY
COMMITTEE





ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 71
BOARD OF DIRECTORS
BOARD OF DIRECTORS



ANITA FREW














— 
— 


— 















— 


—


PANOS KAKOULLIS










—



PAUL ADAMS






       


—


—



—


—

 
—














—


—



— 

IRENE DORNER











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
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

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

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

GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202172
BOARD OF DIRECTORS



LORD JITESH GADHIA



















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

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

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


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


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


BEVERLY GOULET














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

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


— 

LEE HSIEN YANG












— 

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


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
















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

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


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


MIKE MANLEY





 



— 


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

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

WENDY MARS







      




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



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



ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 73
BOARD OF DIRECTORS



SIR KEVIN SMITH













— 


— 

— 

DAME ANGELA STRANK





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







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

—

—



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


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




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

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


 


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
















GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202174
BOARD OF DIRECTORS
BOARD INDUCTION PROGRAMME FOR ANITA FREW






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
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
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BOARD COMPOSITION


NON-EXECUTIVE DIRECTORS’ TENURE
a
b
c
  6
 2
  3
BOARD MEMBERS BY ETHNICITY
a
b
  12
 1
BALANCE OF THE BOARD
a
b
 
 11

 2
BOARD MEMBERS BY GENDER
a
b
  8
 5
BOARD MEMBERS BY NATIONALITY *
a
b
c
  10
 2
  1
 
COMPOSITION OF THE BOARD AS AT 24 FEBRUARY 2022
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
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
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
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

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 75
CORPORATE GOVERNANCE
GOVERNANCE REPORT

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

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

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


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
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
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
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
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

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
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
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

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

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
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




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

 
 
 

   

    
    
    
    

4
  

  

 
    

7
   


 



   

   

  


















ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202176
CORPORATE GOVERNANCE
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 77
CORPORATE GOVERNANCE
BOARD FOCUS THROUGH 2021
AREA OF FOCUS KEY MATTERS CONSIDERED OUTCOME
















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
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


GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202178
CORPORATE GOVERNANCE
AREA OF FOCUS KEY MATTERS CONSIDERED OUTCOME
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


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



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 
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 79
CORPORATE GOVERNANCE
BOARD EFFECTIVENESS
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    
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
     



   






    






     

    



     
   




STAGES OF THE BOARD EFFECTIVENESS REVIEW
OCTOBER 2021


NOVEMBER 2021







DECEMBER 2021



JANUARY 2022








FEBRUARY 2022




GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202180
NOMINATIONS & GOVERNANCE COMMITTEE REPORT
NOMINATIONS & GOVERNANCE




























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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 81
NOMINATIONS & GOVERNANCE COMMITTEE REPORT
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
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GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202182
NOMINATIONS & GOVERNANCE COMMITTEE REPORT

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
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
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 83
AUDIT COMMITTEE REPORT
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















AREA OF FOCUS CONSIDERATIONS

















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
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 85
AUDIT COMMITTEE REPORT
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
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 87
REMUNERATION COMMITTEE REPORT
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























REMUNERATION

— 
— 
— 

—




— 

GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202188
REMUNERATION COMMITTEE REPORT

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

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




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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 89
REMUNERATION COMMITTEE REPORT
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
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


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
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




REMUNERATION COMMITTEE FOCUS DURING 2021
AREA OF FOCUS MATTERS CONSIDERED OUTCOME

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
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
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
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
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
   

    

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
        
          


    



     


        



   


GOVERNANCE REPORT


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



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













ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202190
REMUNERATION COMMITTEE REPORT



REMUNERATION AT A GLANCE















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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 91
REMUNERATION COMMITTEE REPORT
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

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


















GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202192
REMUNERATION COMMITTEE REPORT

CHIEF EXECUTIVE £000 CHIEF FINANCIAL OFFICER £000
100%
66%
77%
34%
23%
£1,095
£3,222
£4,818
Minimum
On-target
Maximum
100%
74%
38%
26%
62%
£792
£2,117
£3,113
Minimum
On-target
Maximum










  
  
  
 


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— 
— 
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Year 5 Year 6Year 4Year 3Year 2Year 1







ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 93
REMUNERATION COMMITTEE REPORT





   
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
GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202194
REMUNERATION COMMITTEE REPORT

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               
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             
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
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 95
REMUNERATION COMMITTEE REPORT
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               
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   16  2,896 113  3,950    2,896
 453 11 1,200 54 1,718  1,200
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 97
REMUNERATION COMMITTEE REPORT
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

GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 202198
REMUNERATION COMMITTEE REPORT

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
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
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

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



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



2022
  

  
 
 
 

  
  
2023
  



  


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 
     
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 




ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 99
REMUNERATION COMMITTEE REPORT










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





     
     
 



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

















 
     

    
     

    
    


4
     

     
    


    


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









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

 

6















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
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


     

    
     

    
   


    


    
   


    

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GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021100
REMUNERATION COMMITTEE REPORT
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









 





1








     
  – 
4
  

     

     

     
  –    
  –    
      

 –   

     

     
  
4
   

     


1.03     













ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 101
REMUNERATION COMMITTEE REPORT

 









   
  
    
    
   
   

 
 
   
    
   
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Rolls-Royce *
FTSE 100
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100
200
300
£
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PAYMENT TO SHAREHOLDERS (£M) * GROUP EMPLOYMENT COSTS (£M)
 
2021
2
020
0 (0%)
0 (-100%)
2021
2
020
3,206 (2.7%)
3,123 (-21.4%)
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

MEDIAN GENDER PAY GAP ACROSS ALL ROLLS-ROYCE EMPLOYEES IN THE UK MEAN GENDER PAY GAP ACROSS ALL ROLLS-ROYCE EMPLOYEES IN THE UK
2021
2
020
4.8%
5%
2021
2
020
3.2%
3%





  
   
   


 
  
  
 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 103
REMUNERATION COMMITTEE REPORT








      

140 3 143

56 3 

4
70   
 105  – 105 
 70  3 73 
 70  6 7 76 

  –  

35 – 35

7
5 – 5
 105  107 

  1  

  –  


31  –  31 


33  – 33 


  1 4  
      




















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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021104
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
    
     
     
 




ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 105
SAFETY, ETHICS & SUSTAINABILITY COMMITTEE REPORT
SAFETY, ETHICS &
SUSTAINABILITY


— 


— 

—

—


—


HSE
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

— 

— 
—




— 
— 


— 
—



—



— 
— 

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


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








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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021106
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 107
RESPONSIBILITY STATEMENTS
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





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
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— 
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


GOVERNANCE REPORT
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021108
FINANCIAL STATEMENTS
Consolidated Financial Statements

Consolidated income statement ���������������������������������������������������������������������109
Consolidated statement of comprehensive income ��������������������������������� 110
Consolidated balance sheet �������������������������������������������������������������������������������� 111
Consolidated cash flow statement �������������������������������������������������������������������112
Consolidated statement of changes in equity ��������������������������������������������� 115

1 Accounting policies ��������������������������������������������������������������������������������������� 117
2 Segmental analysis ����������������������������������������������������������������������������������������� 131
3 Research and development ����������������������������������������������������������������������� 139
4 Net financing �������������������������������������������������������������������������������������������������� 140
5 Taxation ��������������������������������������������������������������������������������������������������������������141
6 Earnings per ordinary share �������������������������������������������������������������������� 146
7 Auditors’ remuneration ������������������������������������������������������������������������������ 146
8 Employee information ����������������������������������������������������������������������������������147
9 Intangible assets ��������������������������������������������������������������������������������������������148
10 Property, plant and equipment �����������������������������������������������������������������151
11 Right-of-use assets����������������������������������������������������������������������������������������152
12 Investments ������������������������������������������������������������������������������������������������������153
13 Inventories��������������������������������������������������������������������������������������������������������155
14 Trade receivables and other assets ��������������������������������������������������������155
15 Contract assets and liabilities ������������������������������������������������������������������ 156
16 Cash and cash equivalents ������������������������������������������������������������������������157
17 Borrowings and lease liabilities ���������������������������������������������������������������157
18 Leases�����������������������������������������������������������������������������������������������������������������158
19 Trade payables and other liabilities ��������������������������������������������������������159
20 Financial instruments ����������������������������������������������������������������������������������160
21 Provisions for liabilities and charges ������������������������������������������������������ 171
22 Post-retirement benefits ����������������������������������������������������������������������������� 172
23 Share capital ���������������������������������������������������������������������������������������������������� 177
24 Share-based payments �������������������������������������������������������������������������������� 178
25 Contingent liabilities ������������������������������������������������������������������������������������179
26 Related party transactions ������������������������������������������������������������������������179
27 Assets held for sale and discontinued operations��������������������������� 180
28 Derivation of summary funds flow statement �������������������������������������182
Company Financial Statements

Company balance sheet ��������������������������������������������������������������������������������������184
Company statement of changes in equity ����������������������������������������������������185

1 Accounting policies ������������������������������������������������������������������������������������� 186
2 Investments – subsidiary undertakings �������������������������������������������������187
3 Trade and other receivables ���������������������������������������������������������������������187
4 Trade and other payables ���������������������������������������������������������������������������187
5 Financial liabilities �����������������������������������������������������������������������������������������188
6 Share capital ����������������������������������������������������������������������������������������������������188
7 Reconciliation of net assets between
Rolls-Royce Holdings plc Group and Company ��������������������������������188
8 Contingent liabilities ������������������������������������������������������������������������������������188
9 Other information ����������������������������������������������������������������������������������������� 189
Subsidiaries������������������������������������������������������������������������������������������������������������ 190
Joint Ventures and Associates ��������������������������������������������������������������������� 195
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 109
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
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 
  

 
   

 45 
 513 

 56 
  

4  

4  
  
  

 
  


 36 

  
  
  

  
 1 
  
 41 
  


  
  

  
  







FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021110
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME






  


  
   

 1 
  
 174 
  


 
  
  

 44 

 
  
 41 
  

 161 
 1
  


  
  
 161 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 111
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET







  

  
   

 404 
  36 

 361 
  

  
  

  

  
   
  

 46 

 
   
  

  
  


  
   

  
   
  

  
  

  

  
   

  

 
   

  
  

  
  
  
EQUITY

  
  
 165 
  
 650 
  
  
  
  
  

 
 
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021112
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT






 513 

  

1
470 
  

  

  

 
  

  

 

 7 
  
  
  
  

 
  
  

  

  

  
  
  
  


  
  

5 
  
 61 
 – 

  

 – 
 
  


4
 

4
 
  
 666 
  
  
  

4  
 – 
 – 

30
 3
  
  
  
  
  
  

7
 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 113
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT – CONTINUED


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  
  
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
   –  –  – 
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 –  – – – – – 
   – 1 35  – 
   –  136   

 –  – 1   – 
  370 –  – 15  

 – 4  – –  – 
    31 170   
     170   

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  –   – – 37
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3
       
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021114
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT – CONTINUED
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    
   
    

     

  
  

    
 
       
       
      
        
        


     
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       




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

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
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 115
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY












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

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1
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     650     
 – – – – – –   1 

 – – – – –  –  – 


 – – – – –  –  – 

  – – – – – –   – 


 – – –  – – –  – 

 – – –  – – –  – 


 – – – – – –   – 

  – – – 44 – – 1 45 – 45

5 – – –  –    – 

 – – –  –   161 1 

 – – 3 – – –  – – –


– – – – – –   – 

– – – – – –   1 30
 – – – – – – – –  
 – – – – – – – – 3 3
 – – – – – – 17 17 – 17
 – – 3 – – – 71 74 3 77
   165  650     
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021116
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY – CONTINUED




























1











          
   

   




   


   

   


    
    

    


4
    
    

  
   


  
  

      
          










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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 117
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1 ACCOUNTING POLICIES
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021118
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES – CONTINUED
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021120
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES – CONTINUED
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021122
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES – CONTINUED
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021126
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES – CONTINUED
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021128
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES – CONTINUED
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021130
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1 ACCOUNTING POLICIES – CONTINUED
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 131
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES – CONTINUED

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


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
IAS 37 




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

IFRS 17 



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





2 SEGMENTAL ANALYSIS



 
 

 
 










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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 SEGMENTAL ANALYSIS – CONTINUED
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 SEGMENTAL ANALYSIS – CONTINUED
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    – 155  
      – 
     303  
 474   1   
       
      – 
   4 – – – 
  457     414

       
       
       
       
       
       
       
       






FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021134
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 SEGMENTAL ANALYSIS – CONTINUED
















   
   
   
  140 
   
   
   45
 414  513
 – 56 56
 414 155 
   
 36  
  444 
 10 114 

51  
 61 60 

 60 60 
 1 – 1


   
   
   
   
   
   
   
   
   
   
   
   
   
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  
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 135
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 SEGMENTAL ANALYSIS – CONTINUED

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  604  –   
 –   – 13 – 
      – 
   134 – – – 
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    303  
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     303  
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
      
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   
  75 
   
  6 

1
  

   
   
   
   
   
   

  


FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021136
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 SEGMENTAL ANALYSIS – CONTINUED







  
 737 
 164 
 106 
  
  
 170 
 146 
 610 
  
  
  
  
 170 
 76 
  
 364 
 635 
  
 105 
  
 137 
 140 
  
  
  
  
 – 
 













1









   41.1   
  0.3 6.5   
      
  –   
  50.6   







ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 137
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 SEGMENTAL ANALYSIS – CONTINUED










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

11





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



  414      


A    33    


A –   110  


A – –  –  


A – –  –  



4
A – –   


– 105 –   


– 45 – 1  

7
C –  – –  

C – – – –  

C –  –   

– 47 –     
 –  6     
        




C – 56 –     
 – – –     

 – – – 30    
  155  444    

        














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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021138
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 SEGMENTAL ANALYSIS – CONTINUED
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   16 – 403
     
  140  57 

    15 
 660 117 177 4 
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     
     
     
     

     
     
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 14 
  
 403 
 – 

 
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 135 
  
  
  
  
  
  
 – 

 
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  
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  
  
  
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 139
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2 SEGMENTAL ANALYSIS – CONTINUED






  
  
  
  
 706 
 
3 RESEARCH AND DEVELOPMENT





  

366 
  
 105 

 
  

4 
  







FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021140
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4 NET FINANCING










1









 7 7  

 –  
 – –  
 63 –  
 17 –  
  –  

– 6  

–   
    
    
  –  

– –  
 – –  
 – –  
  –  
 – –  
 – –  
  –  
 – –  
    
    
    
    

    
  14  
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  –  
    
    


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


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

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 141
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 TAXATION

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 17  151   
     14 
   163   
      
      
 –  –  – 

   –   
      
      

OCI 
 
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 –    – 
 –    – 
 –  –  17 
     17 

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  
  
  

 

 
 – 
  

 
 13 
  

4
 

– 
  

 
 
  
  
 














FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021142
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 TAXATION – CONTINUED





  





  
 636 
  
  
 17 

 

 
  
  
  
  
 






ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 143
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 TAXATION – CONTINUED




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

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
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


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


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
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




   – – –  17 
 34 145 – – –   
 343   –    471
 56 17 – – – – – 73

    – – –  

  165 7 – – 1  
   – 17 –   
   – – –   56
 163  – – – – – 
 636  17    

 600
 36

     
     
      
  

     

      
   
   
  
      

 
 
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021144
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5 TAXATION – CONTINUED





  
  
  
 73 

  

 
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
 4 – – 4 –  

  – –  –  
    66     44 
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





FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021146
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
6 EARNINGS PER ORDINARY SHARE











  


 

    
    
   
      

      
  –    
     




   

 0.11  
    
 5.33 444  
    

 0.11 
7 AUDITORS’ REMUNERATION




 3.3 

  
 11.6 


1.7 

– 

 

4
13.5 

 0.1 











ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 147
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8 EMPLOYEE INFORMATION




  
  
  
  
  
  
 700 
 700 
 600 
 600 
  
  

 

 

 

400 

 


100 
  

 
  
 
















  154    
 343 36    
  –    

  3    

4
     









FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021148
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 INTANGIBLE ASSETS












4






       
    
    

    
    

      
     
       
 – 1 104 –  35 

–      
   – –   

– – – –   6
       
    475   

       

     
     

   
    


    
       

–  75    
 – – – – 1  

–     – 
   – –   

– –  – 6 1 6
 – –     
 34    650  

    133  413 
       










ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 149
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 INTANGIBLE ASSETS – CONTINUED











  760 
   
  37 
 

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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021150
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
9 INTANGIBLE ASSETS – CONTINUED

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 – 
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 151
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10 PROPERTY, PLANT AND EQUIPMENT
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     
    

70  57 – 

4
1  – – 

   – 
    – 

 11  – 
    – 
 614  414  

     
     



















  
  
  
  
  

FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021152
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
11 RIGHT-OF-USE ASSETS












    
    


  
    
 4
 447   
 37 15 30 

  – 
    
 – –  
    
 456 143  

    
    

  

  
    
   
    
 43 30  

   

  – 
    
 – –  
    
  66  

  77  
    

  1  
    
 1 –  
    
    
    









ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 153
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12 INVESTMENTS







 








   
  

 

 

4
 

 

 
  
  
  1  

 1 3 
 – – – 

 –  

4
   –

 –  –

7
 –  –
  –  –
 – – – 
  –  

45 – 45 –
 403 1 404 36



























  

 
 45 
  
  
 –
  




FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021154
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12 INVESTMENTS – CONTINUED

 


   
   
   

  



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
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


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
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      

   51   
 –    – 

      
      
     – 
 314  533  676 
     151 
      
      
 604     

   30  105 

  –  – 

     


      
   104  104 
 –  34   
     – 
 –  137   




 
 

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
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
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
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
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
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
     –   
   316  1   

     –   
     –   

   –  –   

     –   
    1  404 
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 155
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13 INVENTORIES
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14 TRADE RECEIVABLES AND OTHER ASSETS
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      
 147     
      
     
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021156
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
14 TRADE RECEIVABLES AND OTHER ASSETS – CONTINUED

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  
  
 46
 46 
 
  
  
15 CONTRACT ASSETS AND LIABILITIES
 
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613     
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  
 











ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 157
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
16 CASH AND CASH EQUIVALENTS




  
  
  
  
  
  
  





17 BORROWINGS AND LEASE LIABILITIES
  













 7 7 – 7 7

    

–  – – 

–  – – 

4
– 471  471 

4
–    

–    

–    

– 735  735 
 – 540  540 

4
–    

7
–  10  10 
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
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021158
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
17 BORROWINGS AND LEASE LIABILITIES – CONTINUED





18 LEASES










 

 

 
  


4 

 


 
  

 
  
 35 
  




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




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



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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 159
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
18 LEASES – CONTINUED

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    67 
 40  –  40 

760  300   
     


  
  
  
 











FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021160
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS

  










OCI









 

  A 36 – – – – 36

  – 17  – – 
  – – 705 – – 705
  – – – – 

C  – – – – 
 – –  – – 

  –  – – 
   – – – –  

 – – – –  

C – – –  – 
 – – – –  
 – – – –  
 – – – –  

 – – – –  

 – – – –  
  – – – –  
 17    


 A      

       

      
      

C      

      

       
       

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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 161
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS – CONTINUED
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    
    
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



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





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  11 176 346 – 15 – 361
   – 33 – 13 – 46
 171  176  –  – 407
  – –     
  –     – 
  –      
       

      
  7    
      
        
       
        
       
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
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021162
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS – CONTINUED
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
 
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 
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          
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 – –   –  

   4   –  

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  63  –    
       14 4  
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     –  –   
     57  37   
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

  
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   15   
 4  – 4 
 – –  

–  –  


  – –
 3  –  3 
 – – 1 
  – –
   15   
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 163
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS – CONTINUED



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FV
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FV
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
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
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


FV









3




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4


     375     1.00


      116    


   1      1 



        



         



         
















 
1



FV
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







FV































     35     10 
   677    1.11 5.4463   

          
       


FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021164
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS – CONTINUED


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


 





















      171 

  – –   135 
  – – 677  – 
  – –   41 

   60 34 –  –
      



     
       

     
  4 4 4  
    7 


 7  
   77   
      




FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021166
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS – CONTINUED















 –  –  
  –   
 –  – 46 
  41 14 1 


   
    
   
   47 





  
  
  
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 167
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS – CONTINUED












   1 – 36
 176  450 64 
 17 640 30  705
 –  – – 
 – –  – 
 700 673  113 
     
     
     
 – –  – 
   – – 
  – – – 
     
     
 –  – – 
     
    

  
     
   44  
  

    
     
     
     
  
   
  
     
     
  
     
    


FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021168
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS – CONTINUED







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






 – 1 1  
  – – 4 
 1  – 3 –
  14 51  

  
   
  
   



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


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



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






 36 – – – 36
    137 
  – 5 1 705
  – – – 
  – – – 
  – – – 
  – – – 
    

  
     
  
  
  

    
    


ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 169
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS – CONTINUED




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




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

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

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
     
     
    – 
     
  – – – 
     
     
  – – – 
    

     
     
     
     
  
     
     
  
    



















    456
    

  43 
55 61  13 

    
    

  – –
    


    
    

   
    

    
    

   
    


FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021170
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
20 FINANCIAL INSTRUMENTS – CONTINUED



 












 –  

–    
      
      
     

    

   






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 – –  
    
    


ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 171
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
21 PROVISIONS FOR LIABILITIES AND CHARGES







1















     – – 157
       
  5     
       305
 17 – – – – – 17
 60    – – 
 33 5   – – 14
 50 3    – 47
  61   –  
      
  475
  
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021172
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21 PROVISIONS FOR LIABILITIES AND CHARGES – CONTINUED
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



22 POST-RETIREMENT BENEFITS
















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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 173
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22 POST-RETIREMENT BENEFITS – CONTINUED
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   3  
      
 –    

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     

416  575   
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     

     
115     
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
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021174
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22 POST-RETIREMENT BENEFITS – CONTINUED

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      
      
 –    
      

 30    
 –    
 – – –  

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      
     
 614     
 –    
 –    
      
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 
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  
  
   
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
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 175
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22 POST-RETIREMENT BENEFITS – CONTINUED
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  
  
  
   
  

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      
 –    
      
 15 33    
      
 –     

 101    
 –  
      
 –    
 – – –  
      
      
 –    

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     
      
      
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
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      
 –    
      
 153  175   
      

 63    
 –  
      
 – – –  
      
 41  33   
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
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021176
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
22 POST-RETIREMENT BENEFITS – CONTINUED

 
















      
 – – –
      
 54 – 54  
 106 – 106  

 144    

 750    
 – 101 101  
 54 – 54  

43 4 47   
 – 4 4
  –   
 –  
  –   7
      



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
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
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
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  
  

  
 147 
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   
   

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23 SHARE CAPITAL
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
  
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  
 1 –  
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
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021178
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
24 SHARE-BASED PAYMENTS

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 – 
  
 –


 LTI P DSBP
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
1
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

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    
  
   
  

   
   67.6 1.4
    0.1
    
 – –  
 75.1  77.0 
 – – – –
 – – – –
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LTIP
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
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 179
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
25 CONTINGENT LIABILITIES
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











26 RELATED PARTY TRANSACTIONS





 

 
  
 1
 3
  
 3




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
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 4
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
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021180
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
27 DISPOSALS, ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
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

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 77  
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  71 
   
   107
 – 16 16
 – 6 6
 – 7 7
 3 5 
  17 
 70 41 111
  3 
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 14 71 
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   
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 181
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27 DISPOSALS, ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS – CONTINUED

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















 
ITP



1











  –   
 313   4 7
  –  7
 1 34 35
 167 – 167 4
  –    
  14 356   
  –    
  74    
      
  –    
  –    
  –   
 – – –  
      
  67    
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
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 34 
 36 
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 
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  
 4 
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
FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021182
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28 DERIVATION OF SUMMARY FUNDS FLOW STATEMENT
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    
 414 
  
  

   
   
   

 7  
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 66 
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 183
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
28 DERIVATION OF SUMMARY FUNDS FLOW STATEMENT – CONTINUED
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  
  
 374 
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
  
  


 –  
 –  
   
   
  
  


   
  


  









FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021184
COMPANY FINANCIAL STATEMENTS
COMPANY BALANCE SHEET







  
 1
 1
  

 4  
  
  
 7  
EQUITY
  
  
  
  
 303 
  
  



 
 

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 185
COMPANY FINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY


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



1
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


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

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

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
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

       
  


   
  
  
  

  
       
 – – – 3 –  –

 – – – –  – 
     303  

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
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FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021186
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES

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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 187
NOTES TO THE COMPANY FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES – CONTINUED
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2 INVESTMENTS–SUBSIDIARY UNDERTAKINGS
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 
 
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
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





3 TRADE AND OTHER RECEIVABLES
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 1
4 TRADE AND OTHER PAYABLES



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 335 

FINANCIAL STATEMENTS
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021188
NOTES TO THE COMPANY FINANCIAL STATEMENTS
5 FINANCIAL LIABILITIES







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  
  
  

6 SHARE CAPITAL
 

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of £1


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
 1 – –  
 1 – –  



7 RECONCILIATION OF NET ASSETS BETWEEN ROLLS-ROYCE HOLDINGS PLC GROUP AND COMPANY

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8 CONTINGENT LIABILITIES

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

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 189
NOTES TO THE COMPANY FINANCIAL STATEMENTS
9 OTHER INFORMATION

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FINANCIAL STATEMENTS
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
























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
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021190
SUBSIDIARIES
SUBSIDIARIES
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
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
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
 

 
   
   
 




 
 
 

 
 
 
 
 
   
 
 




 
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   
 
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 
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   
 

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 



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 

 
 



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   
 
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

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   
 

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   
   
 

 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 191
SUBSIDIARIES
 





 

 
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
 
   
 

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   
 



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 

 
   
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

 




 
 
7
 
   
 

 
 

 
 

 
 

 
 
 
   
   
 

 
   
 

 
  


 
 
 
 
 
 




 



7
 
 
 
 



FINANCIAL STATEMENTS






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
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
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

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


ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021192
SUBSIDIARIES
 








 
 
 
   
   
 

 
 
 
 
 
 

 
   
 


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 
 


7
 
   
 
 
 

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
 

 
   
   



 
 

 
 
 



7
 



7
 
 
7
 
 
7
 
 

 
 
7
 
 

 
 
 



 
 

 
 
 
 
 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 193
SUBSIDIARIES
 





 
 
 
 
 
 
 


 




 
 
7



 
7
 
 
 
 
 
 
7
 
   



7
 
   
 

 
 
7
 
 

 
 

 
 
 
   
   
   
  



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
   




 
 

 
   
 

 
   
 

 
   
 

 
 

 
   
   
   
 

 
   
 

 
FINANCIAL STATEMENTS




























ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021194
SUBSIDIARIES
 





 
7
 
   
   
   
   
 
7
 




 
 
7
 
   
 
7
 
 

 
 
7



   
   
   
  



   
   
   

¹ 
7




 




 

 
 
 
 
7
 
 
7
 
 
7
 
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 
 
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 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 195
JOINT VENTURES AND ASSOCIATES
 
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7
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 

  
 

  




  
 

  
    
JOINT VENTURES
AND ASSOCIATES
FINANCIAL STATEMENTS




























ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021196
JOINT VENTURES AND ASSOCIATES
 







    
 

  


   


   
 
7
  






 



 
7
  
 

  


   
 

  


 




 



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 
7
  
    
    





  
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 197
INDEPENDENT AUDITORS’ REPORT
INDEPENDENT
AUDITORS’ REPORT
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ROLLS-ROYCE HOLDINGS PLC

Opinion

— 


— 
— 

— 










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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021198
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
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— 
— 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 199
INDEPENDENT AUDITORS’ REPORT

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

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 201
INDEPENDENT AUDITORS’ REPORT
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

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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021202
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
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
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

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 203
INDEPENDENT AUDITORS’ REPORT
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

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




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
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 205
INDEPENDENT AUDITORS’ REPORT
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
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021206
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
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— 

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 207
INDEPENDENT AUDITORS’ REPORT
— 
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021208
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— 
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— 
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 209
INDEPENDENT AUDITORS’ REPORT

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

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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021210
INDEPENDENT AUDITORS’ REPORT

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
— 
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

— 
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


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
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




ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 211
SUSTAINABILITY ASSURANCE STATEMENT
SUSTAINABILITY
ASSURANCE STATEMENT












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
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
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
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
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
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

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


OTHER INFORMATION
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021212
GREENHOUSE GAS EMISSIONS
GREENHOUSE
GAS EMISSIONS



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

    

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

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
    
     
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

ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 215
ALTERNATIVE PERFORMANCE MEASURES
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 
  
 0.11 

 






  36 


  

  
 64 
 5 
 – 
  
  

 51 












  
 377 
  
  

  
  
  

  
 46 
  



  

 
  


RECONCILIATION OF ALTERNATIVE
PERFORMANCE MEASURES (APMS)
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021216
ALTERNATIVE PERFORMANCE MEASURES
















  

  
  
  
 – 
 4 
  

 156 



  
  

 
  



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 
 
 
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 217
DIRECTORS’ REPORT
DIRECTORS’ REPORT

























  
  
 
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021218
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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 219
DIRECTORS’ REPORT

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ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021220
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






ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021 221
SHAREHOLDER INFORMATION



















    
    
    

    
    
    
    
    
    
    
OTHER INFORMATION
ROLLS-ROYCE HOLDINGS PLC – ANNUAL REPORT 2021222
GLOSSARY
 
 
 

e 
 
 
 
 
LTIP 
 
 
 
MoU 
 
MW 
NCI 
NED 
OCI 
OE 
OECD 
OEM 
 
PBT 
PPE 
PSMS 
PSP 
 
 
 

 
 
 
 
 
SID 
SFO 
 
STEM 
TCFD 
 
 
 
 
UTCs 
 
 

 
 
 
 
 
 
 
 
 
 
CEO 
CFO 
 
 
 
CPS 
 
 
 
 
 
 
 
 
EIS 
ELG 
EPS 
 
ESG 
EU 
 
EVTOL 
 
FCF 
 
FTE 
FX 
GBP 
 
 
 
 
GLOSSARY




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
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
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
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
™

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






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
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
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


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










    

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
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







