Defence Aerospace

	H1 12	H1 11	Change
Order book (£bn)	5.5	6.0*	-8%
Engine deliveries	393	330	+19%
Underlying revenue (£m)	1,134	1,088	+4%
Underlying OE revenue (£m)	559	504	+11%
Underlying services revenue (£m)	575	584	-2%
Underlying profit before financing (£m)	196	219	-11%

*2011 year-end data

Financial

An eight per cent reduction in the order book to £5.5bn reflects the budgetary pressures of our major customers in Europe and North America. Net order intake was £0.6bn and includes cancellations of £0.4bn, the majority of which reflects the cancellation of the C27J aircraft contract by the US Department of Defense (“DoD”). The business continues to benefit from the breadth and diversity of our portfolio and our access to developing economies. Significant orders in the period included:
- Over US$870m worth of contracts with the US DoD for OE and services for military transport engines for the US Air Force, US Marine Corps and US Navy.
- A US$315m contract from Pratt & Whitney for 17 LiftSystem sets for the F-35B STOVL variant of the Lightning II Joint Strike Fighter.
- A £100m contract extension to maintain the engines for the UK MoD’s fleet of C-130 military transport and VC10 tanker fleets of aircraft.
- A contract with the Royal Australian Air Force to help improve the fuel efficiency of its fleet of C-130 military transport aircraft.
Revenue increased by four per cent, reflecting an 11 per cent increase in OE revenue. OE revenue benefited from a 19 per cent increase in engine deliveries, with more military transport and combat engines and significantly more civil helicopter engines delivered during the period. Services revenue fell by two per cent, however adjusted for the non-recurrence of the £60m SDSR benefit in H1 2011, services revenue increased by ten per cent. This increase highlights how our large installed base will continue to provide services opportunities as customers seek to optimise the efficiency of their aircraft.
Profit was down 11 per cent, primarily due to the non-recurrence of the £60m SDSR benefit in 2011. Adjusted for the non-recurrence of this benefit, profit increased by 23 per cent due to increased OE volumes and mix, growth in services and unit cost improvements.

Portfolio

The F-35B made its maiden training mission and also its 500th short take-off during the first half. The DoD lifted the probationary status for the F-35B STOVL variant of the JSF, safeguarding the future of the LiftSystem.
We continue to work with our partners on the TP400 engine towards the 2013 entry into service of the A400M military transport aircraft.
We continued to invest in the ADVENT development programme for the next generation of heavy combat aircraft for the United States Air Force, and are bidding for inclusion in the AETD development programme.