Marine (First-half)

Marine (First-half)
2010 2009
Order book (£bn)3.23.5
Underlying revenues (£m)1,3571,227
Underlying OE revenues (£m)928851
Underlying service revenues (£m)429376
Underlying profit before financing (£m)171110

The Marine business provides complex integrated power systems for a range of applications in the offshore oil and gas, specialist vessel and naval markets. It has more than 2,000 customers with equipment installed on more than thirty thousand vessels worldwide.

The Marine business performed particularly strongly in the first-half of 2010 delivering double-digit revenue growth and a 55 per cent improvement in profits despite a challenging trading environment. Cancellations of existing orders have slowed and there are early signs of a recovery in demand. While £1bn of new orders were booked in the period, these did not make up for the completion of existing orders and as a result the order book weakened to £3.2bn at the end of the first-half.

The market for specialist vessels continues to offer good opportunities, and demand from the offshore oil and gas sector remains encouraging, with continued deepwater developments in a number of major offshore locations including Brazil, West Africa and Russia. The completion of the ODIM ASA acquisition in April adds significantly to our capability. We acquired the remaining 67 per cent of the business in April, an investment of £147m in cash (£218m including the 2009 investment), bringing significant seismic, oceanographic and offshore deck handling capabilities.

New programmes achieved a number of important milestones. These included the Littoral Combat Ship (LCS) entering active duty. We now expect the selection between the competing LCS designs, which will move forward to production, to be announced by the end of 2010. Sea trials for the nuclear powered Astute class submarine and the Type 45 Destroyer, HMS Daring, are progressing well.

New service facilities around the world supported good aftermarket growth of 14 per cent in the period, a trend expected to continue through the remainder of the year.
The combination of improving revenue mix, strong operational performance, more favourable contract pricing and the non-recurrence of a number of one-off charges in 2009 contributed to strong improvement in margins and profitability. 

Marine Outlook

Whilst there are some improving signs for future orders, the environment remains uncertain. However, visibility of the trading profile over the second half remains good. Overall, revenue for the full-year is expected to be modestly below 2009 reflecting weaker original equipment revenues, partly offset by the contribution from ODIM ASA. Full-year profits are expected to be well ahead of 2009 with second half profits slightly lower than those achieved in the first-half of 2010.

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