Defence Aerospace

*Full year 2010 data

Financial

• A five per cent reduction in the order book to £6.2bn reflects budgetary pressures in Europe and North America. However, new orders of £0.8bn (£1.2bn in H1 2010) confirm that opportunities still exist, particularly in services, in our traditional markets as well as in the developing economies. Significant orders in the period included:
  • MissionCare™ support for the UK Royal Air Force and the US Air Force for C-130J transport aircraft.
• Revenues increased by seven per cent. A one per cent reduction in OE revenues reflects the phasing of engine deliveries that will improve significantly in the second half. Strong growth in services revenues benefits from the SDSR contract settlements with the UK MoD. Given the scale, breadth and balance of the portfolio, the expected operational and financial impact of the SDSR has been modest, excluding contract settlements.
• Profit benefited from the one-off SDSR settlements of £60m.

Portfolio

• The US Department of Defence has halted the F136 second engine programme for the F-35 Lightning II Joint Strike Fighter (JSF) with development around 80 per cent complete. We continue to consider options with our partner General Electric Co.
• While the Short Take-Off and Vertical Landing (STOVL) variant of the JSF is on probation, the Liftsystem™ is performing well in testing.
• The TP400 engine for the A400M aircraft completed engine certification. Flight testing continues.

Full Year Outlook

• Defence Aerospace remains well-positioned to service traditional and developing markets, supported by the expansion of the portfolio, a market-leading presence in military transport and access to a global customer base.
• Revenues are expected to grow by mid single digits with strong growth in OE. Services revenues are expected to grow modestly, including the benefit of the SDSR settlements.
• Profit is expected to be around £60m better than 2010, mainly due to one-off SDSR settlements.