|H1 2009||H1 2008|
|Underlying revenues (£m)||2,280||2,102|
|Underlying services revenues (£m)||1,337||1,322|
|Underlying profit before financing (£m)||257||272|
The Civil Aerospace business’ order book has continued to grow in the first-half from £43.5bn at the end of 2008 to £46.7bn at the half-year. While order activity for the first-half has been lower than in recent years, demand for the major programmes has been encouraging, with engine orders totalling £6.3bn for the A320, A330 and the A350 XWB.
The business continues to manage the consequences of further delays in airframe programmes as well as weakening overall demand for aircraft capacity as a result of the deteriorating global economy.
Total new engine deliveries in the first half of 424 included a record 103 Trent deliveries. Deliveries of smaller engines, however, were lower as predicted. An increasing proportion of deliveries were on TotalCare™ service contracts, which are an important driver of long-term service revenue growth.
Service revenues generated from long-term contracts (TotalCare and CorporateCare™) continued to grow strongly, reflecting the increasing number of engines under contract. The increasing significance of Trent deliveries in the widebody sector saw installed thrust, and therefore the potential for future service revenues, rise by 9m lbs to 357m lbs across the fleet. These trends are largely offsetting the reduction in more discretionary Time and Materials (T&M) service activities, resulting from the reduced scope of repair and overhaul activity on some engines and increasing numbers of Rolls-Royce powered parked aircraft compared to 2008.
Although the total number of additional parked aircraft has increased by 662 to around 2,500 over the last 18 months, the number of additional Rolls-Royce powered parked aircraft, at 148, has remained low, as older, less fuel-efficient aircraft continue to be parked ahead of the relatively young, fuel-efficient Rolls-Royce fleet. More than 80 per cent of total parked aircraft are narrowbody and regional jets with the parked widebody population being dominated by aircraft more than 20 years old such as the DC-10, Tristar and early generation B747 aircraft to which Rolls-Royce has limited exposure.
The net result has been a strong increase of 21 per cent in revenues from new engine deliveries compared to the first half of 2008 and a one per cent increase in aftermarket revenues as the growing installed thrust on new aircraft offsets the effects of lower utilisation levels and parked aircraft.
A number of important milestones were passed during the first-half. The certification of the BR725 engine for the Gulfstream G650 aircraft, due to enter service in 2012, was achieved ahead of schedule; the Trent 700EP entered service and a number of upgrade kits have now been sold within TotalCare; the Trent XWB “design freeze” was achieved on time and manufacture for early assembly in 2010 commenced; and the 4,000th V2500 was delivered.
The changing revenue mix, increasing unit costs, higher R&D charges, partially offset by an improving foreign exchange environment and higher RRSP fee income, all contributed to lower reported margins and profits in the period.
Global air travel and airfreight continue to be adversely impacted by the economic downturn. Airframe delays and customer financing issues add to the uncertainty surrounding future engine volumes. The Group continues to expect engine deliveries to fall in 2009, with stable services revenues. Underlying profits are expected to be lower in 2009 than in 2008.