Aerospace Aerospace sales of £1,493 million compared with £1,451 million in 2000. The year on year trend is significantly affected by the formation of AgustaWestland, the acquisition of the St Louis facility from Boeing and currency movements. 2001 should be seen as the base year from which the restructured business will move forward.
Similarly, the profit increase to £119 million from £116 million in 2000 is not capable of direct comparison due both to changes in status and the inclusion in 2000 of final credits arising on defence related contracts. The AgustaWestland joint venture made a good start and the contribution from GKN's 50% holding was similar to the profit from Westland Helicopters as a subsidiary in 2000.
GKN Aerospace Services Underlying performance improved at GKN Aerospace Services. Since 1997 aerospace subsidiary sales have risen from £150 million to £630 million. GKN Aerospace Services conducts 59% of its business in the US, the world's largest aerospace market, and 41% in Europe. Military aircraft are an important market and defence sales account for 60% of revenue.
The most significant event in 2001 was the completion in January of the purchase of the Boeing Military Aircraft and Missile Systems Group's fabrication operations in St Louis, Missouri, USA. This transaction established a strategic relationship with the world's largest aerospace company and increased GKN's exposure to the US defence market. The St Louis plant manufactures metal and composite structural components primarily for the F18E/F and the C17. The US Navy and Marine Corps are set to acquire 480 F18s and the US Air Force more than 180 C17s. These two programmes represent future business worth an estimated $1.9 billion to GKN.
During 2001, GKN also completed a wide ranging restructuring of its aerospace activities which involved the closure of three manufacturing sites in the UK and US and the divestment of a small actuation business in Germany. Operations are now focused on seven centres of excellence in Germany, the UK and the US. In addition some minor actions and asset write-downs were made in anticipation of a modest down cycle in civil demand.
However, following the impact of the events of September 11th on the world airline industry, GKN implemented a significant further reduction in its cost base as civil aircraft manufacturers reduced or cancelled programmes. The Group also wrote down by £50 million the carrying value of some aerospace assets mainly in respect of the non recurring initial costs of design, development and tooling for new programmes.
In early 2002, GKN acquired the specialist Thermal Joining Centre (TJC) in Kent, Washington State, USA, from Boeing. The TJC produces an important titanium assembly for the F22 fighter aircraft. The F22 programme is now worth an estimated $1.4 billion to the Group.
AgustaWestland With effect from 1 January 2001, GKN and Finmeccanica SpA merged their helicopter subsidiaries into a new 50:50 joint venture, AgustaWestland. The management team has come together well, synergies are being realized, the order book was executed without disruption and new programmes were won. The year end order book, plus major contracts booked in January 2002, stood at £5.2 billion.
Denmark has ordered 14 EH101 aircraft for search and rescue and troop transport. Portugal has ordered 12 EH101 helicopters for combat search and rescue and fishery protection. The successes in Denmark and Portugal have confirmed the competitiveness of the EH101. The Royal Thai Navy ordered two Super Lynx helicopters and in January 2002 Oman ordered sixteen. A total of 62 NH90 helicopters have also been ordered by Finland, Norway, Portugal and Sweden. AgustaWestland is a 32% partner in NH Industries which produces the NH90.
Denmark has ordered 14 EH101 aircraft for search and rescue and troop transport. Portugal has ordered 12 EH101 helicopters for combat search and rescue and fishery protection. The successes in Denmark and Portugal have confirmed the competitiveness of the EH101. The Royal Thai Navy ordered two Super Lynx helicopters and in January 2002 Oman ordered sixteen. A total of 62 NH90 helicopters have also been ordered by Finland, Norway, Portugal and Sweden. AgustaWestland is a 32% partner in NH Industries which produces the NH90.
A large opportunity for AgustaWestland is access to the US market for the EH101 following preliminary agreement with Lockheed Martin to initiate a joint effort to address the US Government medium-lift helicopter market with immediate attention focused on a US Air Force combat search and rescue requirement for approximately 130 aircraft. There are also US Navy, Marine Corps and Coastguard programmes for which a US version of the EH101 could be highly competitive.
As part of the UK Bowman digital military communications system, AgustaWestland was awarded a £100 million conversion, training and support programme. The AB139 medium twin helicopter, being developed in collaboration with Bell Helicopter Textron, completed a successful series of flight trials in 2001.
In January 2002 AgustaWestland announced the consolidation of UK operations onto the Yeovil site and a reduction in the workforce. GKN's share of the costs of this reorganisation, which are estimated to be £11 million, will be charged to operating profit in the first half of 2002.
