AEROSPACE Aerospace sales of £1,502 million were level with 2001 but with different year-on-year performance in subsidiaries and joint ventures. Subsidiary sales of £559 million were £71 million (11%) lower as a consequence of the fall in demand for civil aircraft. Joint venture and associate sales (mainly AgustaWestland) were £943 million, an increase of £80 million (9%) as production peaked on EH101 and Apache.
Operating profit before goodwill amortisation and exceptional items, after charging GKN's £11 million share of redundancy and reorganisation costs in AgustaWestland, was £118 million compared with £119 million in 2001.
There was no net impact from currency, acquisitions and divestments on either sales or profit. On a reported basis, profits of subsidiaries of £23 million were £9 million (28%) lower than last year with joint ventures and associates £8 million (9%) higher at £95 million. However, in addition to redundancy and reorganisation costs, currency and acquisitions, these comparisons are also affected by the treatment of one-off fees paid in 2001. Adjusting for all these items, the subsidiaries' profits of £23 million represented a £1 million (4%) reduction while joint ventures and associates were level at £95 million.
Operating profit after goodwill amortisation and exceptional items was £91 million (2001 - £32 million).
GKN Aerospace Services 2002 Sales £559 million (2001 - £630 million) The downturn in civil aerospace was exacerbated for GKN by BAE Systems' cancellation of its RJX regional jet programme and the financial collapse of Fairchild Dornier in early 2002. GKN was a significant supplier to both. A rationalisation of Aerospace Services' civil operations in the UK announced in late 2001 resulted in more than 800 redundancies mainly at Cowes on the Isle of Wight. The rationalisation was mostly completed in the first half of 2002. The business is now operating at a size appropriate to current demand but the management task continues to be challenging.
In 2002, two small but significant US transactions brought new technology to the business. In January, GKN acquired the assets of Boeing's Thermal Joining Center (TJC) in Kent, Washington State. The facility produces a critical titanium assembly for the F/A-22. The TJC, acquired for $2.5 million, has the largest electron beam welding chamber in the US. In May, GKN acquired ASTECH Inc of the US for $32 million. ASTECH is a US technology leader in super alloy, honeycomb structures based in Santa Ana, California in the US.
GKN is a leader in the development of new composite technologies such as Resin Film Infusion (RFI) and Resin Transfer Moulding (RTM) which enable higher levels of precision, quality and productivity. During 2002 a new composite engineering centre was opened at Meriden, Connecticut in the US and the largest RTM facility in the US was established at the St Louis, Missouri facility.
On the F-35 Joint Strike Fighter GKN has been selected to develop and manufacture critical composite structures on the aircraft's F-135 engine using its new RTM technology. It will also supply titanium components for the F-135.
The Airbus A380 will utilise GKN's RFI and RTM composite manufacturing technology. GKN has been awarded a number of contracts on the A380 with a value of $2 million per aircraft.
During 2002 GKN joined Boeing's technology development team working on the radical Sonic Cruiser concept but which is now focused on a more conventional aircraft which will still require a high content of advanced materials. This is GKN's first major involvement as a tier one supplier to Boeing's commercial operations.
AgustaWestland 2002 Sales £865 million (2001 - £784 million) AgustaWestland, a 50:50 joint venture between GKN and Finmeccanica, continued to perform well and, on the basis of reported revenues, maintained its position as the world's largest helicopter company. After a series of export wins in 2001 and 2002, the order book currently stands at £4.7 billion.
In early 2002, anticipating the completion of UK military orders for 66 EH101 helicopters, UK operations were consolidated on to the Yeovil site in Somerset and the smaller nearby facility at Weston-Super-Mare was closed. The UK workforce of AgustaWestland was reduced by some 800. The consolidation was announced in January 2002 and completed by mid-year.
EH101 export programmes for Portugal and Denmark were confirmed and Oman ordered 16 Super Lynx 300. The UK Ministry of Defence (MoD) also placed a £30 million engineering study with AgustaWestland to examine the feasibility of an upgrade of the British Army's existing Lynx fleet to meet a requirement for a new battlefield light utility helicopter (BLUH). In its announcement the MoD estimated that BLUH could be worth £1 billion to AgustaWestland.
At the Farnborough Airshow in July 2002 AgustaWestland and Lockheed Martin announced that they had signed a 10-year definitive agreement to jointly market, produce and support a medium-lift helicopter in the US. The US101, an American version of the EH101, will initially be offered to three key markets where there are emerging opportunities - US Air Force combat search and rescue, US Coast Guard civilian search and rescue and US Marine Corps executive transport. It is estimated that these three programmes represent a combined requirement for 200 aircraft over 10 years. (end of excerpt)
Click here to read GKN’s full financial statement for 2002, on the company’s website.
