Highlights of the year
In defence aerospace, Rolls-Royce is number one in
Europe and world number two in terms of engines in service. We have
the largest military engine customer base, serving over 160 armed
forces worldwide with 24,000 engines in current military service.
The defence aerospace business is also responsible for a further
11,000 helicopter engines in commercial service.
- Joint Strike Fighter projects meeting cost targets, on schedule
and beating weight goal.
- Austria became first confirmed export customer for
- Landmark orders announced for Adour-powered Hawk from the UK
- Consolidated our position as transport market leader through
participation in the TP400 for the Airbus A400M.
- The AE 3007 for Global Hawk progressed to Low Rate Initial
- Japan Defense Agency selected the RTM 322 to power its new
Defence is a solid and growing business which is profitable and
cash generative in all its phases. We have a sound order book with
good forward visibility and in 2003 we continued to strengthen our
market position, winning significant engine and service contracts.
Aftermarket services represented 56 per cent of defence aerospace
sales, further demonstrating our customers’ acceptance of our
Mission Ready Management Solutions (MRMS) services offering.
New engine deliveries accounted for 28 per cent of sales, while
income from research and development work to government customers
reached 16 per cent of sales.
The United States, which is the world’s largest defence market,
increased its defence budget again in 2003. The United Kingdom is
the largest market within Europe, and Europe itself is the second
largest defence market in the world. Approximately 45 per cent of
the global market is related to air systems and a third of this, or
15 per cent overall, is spent on power systems. The gas turbine
propulsion element for new engine deliveries is expected to grow
over the next five years.
A large proportion of future defence business is already contracted
for, providing a high level of forward visibility.
Rolls-Royce, together with its partners, has been
selected for a growing share of this committed market, a trend we
expect to continue.
Our broad portfolio of product programmes reduces our dependence on
any single programme and provides strong positions in the key
market sectors – from combat and light attack to trainer,
transport, helicopters, maritime reconnaissance and aerial
surveillance. The 24,000 engines in service and our large global
operator base create a growing business opportunity as customers
seek to maximise the value of their equipment and reduce their
operating costs. Each of the programme phases, from development
through to production and in service, provides a value creation
opportunity for the defence business.
Customers’ priorities are changing and increasingly they are buying
capability rather than just equipment. This translates into a
services business opportunity for Rolls-Royce and we
are expanding our services capability under the banner of MRMS.
MRMS spans the total range of services, from engines and spare
parts supply to Power by the Hour contracts. The latter are
modelled on the Group’s successful commercial aftermarket
experience and use remote condition monitoring capability developed
in the energy markets Rolls-Royce serves. Since
launching MRMS two years ago we have taken orders to the value of
US$500 million, spread over a wide range of customers.
We have transformed our capability and footprint in the important
United States market through the presence of
Rolls-Royce Defense North America. We employ 1,800
highly skilled people in the defence business in North America and
we have nearly 7,000 engines in service with the US armed forces.
Rolls-Royce companies will supply over 25 per cent of
all engines currently planned for purchase by the US Department of
Defense (DoD), our largest government customer.
On the Joint Strike Fighter programme, 2003 saw the successful
completion of the Critical Design Reviews for both F135 and F136
propulsion system programmes, allowing the teams to begin
manufacture and testing of all components. Successful rig tests of
LiftFan™ development hardware have been concluded, validating
system capability and mitigating future development risk.
The V-22 Osprey programme received a significant boost in the year,
with the continuation of a successful flight test resulting in
affirmation of the programme by the DAB (Defense Acquisition
Board), which lays the groundwork to continue initial production
through to 2008.
In Europe, through Rolls-Royce collaborative
programmes, the defence business enjoyed further success with the
selection of the TP400 engine for the European Airbus A400M
transport aircraft. In helicopter programmes, the RTM 322 and MTR
390 turboshaft engines were selected by Greece and Spain
respectively. Importantly, the UK and India confirmed their
procurement of Adour powered Hawk jet trainers.
Our strategic defence priorities are to:
- secure our positions on new programmes.
- use our large market share to help expand our MRMS aftermarket
- maintain our position as the world’s largest helicopter engine
- build upon our strong position in Unmanned Aerial Vehicles,
such as the US Global Hawk and Firescout programmes.
- continue to leverage Rolls-Royce products,
services and technologies across the business.
- continue to focus upon improving efficiency and cost
|Underlying PBIT £m
|Net assets £m
|Order book - firm £bn