Rolls-Royce is a world leader in the provision of marine propulsion systems, offering a unique set of products and services for both naval and commercial sectors.

All of our marine business segments, offshore, merchant, naval and submarines, are performing well. Across the business the order book stands at over £2 billion and factories are operating at capacity.

The success of the marine business depends increasingly on delivering integrated power and propulsion systems for customers. Over the past year, the business has made good progress towards its goal of being a complete system supplier.

We are well positioned on US naval gas turbine programmes. The first Lockheed Martin-designed Littoral Combat Ship (LCS), Freedom, was launched, powered by the MT30 engine. In the UK, we continued to make good progress with the next generation of Royal Navy Type 45 destroyer, powered by the WR21 engine.

We have a long history of supplying complete systems to customers through our UT Design and equipment packages. Today, we are reaping the benefits of the expertise we have gained in this area. Buoyed by high oil prices, the demand for service and support ships has been matched by similar growth in exploration and production.

Our UT Design is one of the most successful ship designs in commercial shipbuilding. We design true 'system' ships, powered, equipped and controlled by us and usually incorporating Rolls-Royce power, propulsion, deck machinery and motion control equipment. This can range from propellers, thrusters and diesel engines to increasingly sophisticated technology such as dynamic positioning and automation and control systems.

The concept of selling systems to our offshore customers is well embedded and we are now successfully extending this area of our expertise for the benefit of our merchant customers. Our merchant business is centred in Shanghai, in the middle of the North-East Asian triangle made up of Korea, Japan and China, which accounts for over 85 per cent of the world's commercial shipbuilding. This location gives Rolls-Royce a strong position in the region to supply our customers with individual components and systems. A number of shipbuilders in the Far East are new entrants to the market and we sell complete design, power and propulsion packages, thereby giving them a technological advantage in a very competitive marketplace.

To support sales of Rolls-Royce propulsion systems, we will be opening a new diesels factory in Asia. This is a significant investment in capability to meet increasing customer demand. Automation and control systems form an increasing part of these systems, endorsing the Group's investment in high-value electronic equipment.

We are continuing to develop new customer relationships. The Flotilla Reactor Plant Support (FRPS) will transform the relationship between the submarines business and our customer bringing increased propulsion system availability at lower cost. This new approach - similar in style to TotalCare® - together with opportunities in support of future submarine programmes, submarine rescue systems and emerging civil nuclear programmes, enables us to build and develop the full potential of our people and skill base in our submarine business.

Many of our programmes are based upon propulsion systems. In addition to the prime mover, the gas turbine, Rolls-Royce is supplying waterjets and smaller, secondary gas turbines that provide ships with auxiliary power. We are also applying this approach to the power and propulsion systems for CVF - the future British aircraft carrier and its French PA2 equivalent. The MT30 forms the basis of our proposals for the propulsion system for each of these ships.

We have already introduced TotalCare type support packages for some of our naval customers, based on the successful model developed in our aerospace businesses. About 40 per cent of our turnover is involved in aftermarket service support across our full range of products and we are expanding our capabilities at service centres around the world.