back 
Moving beyond defence to security
new orders, while building
capabilities in growth areas.
| Download Excel |
| (€m) | 2005 | 2004 | Variation |
| Revenue | 5,636 | 5,385 | +5% |
| EBIT | 201 | 226 | –11% |
| Order intake | 6,673 | 8,457 | –21% |
| Order book | 18,509 | 17,276 | +7% |
Defence & Security Systems ramped up Eurofighter production and increased missile deliveries. The Division won a high number of new orders, increasing the size of the order book, with especially buoyant orders for its advanced technological solutions in missiles and missile defence, and security solutions. Management acted to improve the Division’s range of capabilities and operating effectiveness.
Driven largely by Eurofighter and missile programmes, revenue increased by 5% to €5.6 billion (€5.4 billion in 2004). Thirty-four Eurofighters for Germany and Spain, some 600 Storm Shadow/Scalp long-range cruise missiles and 66 Taurus air-to-ground missiles have been delivered as at the end of 2005. EBIT is at €201 million (€226 million in 2004, due to the one-off release of a litigation provision), despite around €100 million charges for 
UAV activities in 2005. Hence operational profitability has clearly increased over 2004.
Order book growth
The order book rose by 7% to €18.5 billion at the year end (€17.3 billion in 2004). Substantial contracts included Spain’s order for the Taurus air-to-ground missile, a Defence Electronics order for Eurofighter self-protection systems, India’s order for Exocet missiles, the UK’s contract award for the defence information infrastructure project, and confirmation of the border surveillance contract in Romania. As part of the Medium Extended Air Defence System (MEADS) International consortium, LFK and MBDA were awarded a part in designing and developing the tri-national MEADS system.
This large order book provides considerable certainty as to the revenue outlook for the next few years. Its backbone remains Eurofighter (Tranche 1 and 2), as well as missile orders. While the majority of orders are from European countries, the percentage of export orders is growing.
Increasing efficiency and enhancing integration
Due to a more integrated structure within Defence & Security Systems, which includes a consolidation of the sales and marketing organisation and the creation of the ‘System Design Centre’ as a centralised entity, Defence & Security Systems will present a more integrated approach and will focus more intensely on its national customers and markets. The organisational structures in the Business Units, ‘Defence and Communications Systems’, ‘Defence Electronics’ and ‘Military Air Systems’ are being streamlined.
Two acquisitions added to capabilities in growth sectors. In September, the Division acquired Nokia’s Professional Mobile Radio (PMR) business, making EADS the only competitive global secure telecommunications player offering both the TETRA and TETRAPOL technologies. In December, EADS and ThyssenKrupp Technologies jointly acquired Atlas Elektronik, the naval electronics company, which will strengthen capabilities in the field of naval electronics and systems, creating a ‘maritime systems and electronics house’ for both surface ships and submarines.
The PMR acquisition allowed EADS to submit a joint tender with Siemens to provide the German security authorities with a national digital voice and data transmission network.
Building on its strong platform business in defence that currently accounts for most of the Division’s revenue, Defence & Security Systems is implementing a strategy of further enhancing its systems and security activities. While Eurofighter and missile contracts form the backbone of the order book, there is a strong focus on adding to capabilities in command and control systems, maritime systems, global security and secure communications, where EADS sees opportunities for growth in the medium term.
Reorganisation of the Division will improve access to markets and optimise interfaces with home markets. Integration of central functions at divisional level is reducing cost, and will continue to enhance profitability. Additionally, Defence and Communication Systems (DCS), Defence Electronics (DE) and Military Air Systems (MAS) were reorganised. Together with the integration of LFK into the MBDA missile business, this will further pave the way for greater efficiency.
In 2006, Defence & Security Systems will further shift from development to production of missiles and other products. Additionally, Eurofighter export campaigns may strengthen the order book, and Unmanned Aerial Vehicle (UAV) product development may stimulate customer demand. Looking further ahead, security activities are expected to contribute progressively more to revenue.
