Our sales in Aerospace rose 16% compared to the separate Smiths and Dowty Aerospace sales of a year earlier. Profit increased by 18%, reflecting buoyant demand for original equipment on new aircraft, and for upgrades and aftermarket support of aircraft in current operation. Sales of machined components for aircraft engines also increased.

Business on commercial aircraft remained healthy through this period, while defence sales continued their upward trend. Among several significant programme wins, we were selected by Boeing to help upgrade the avionics on the USAF's fleet of over 500 C-130 military transport aircraft, an order worth more than $250m.

We made two acquisitions for the division during the year, both in the US: Fairchild Defense, which cost £75m and makes data recording and analysis systems for military aircraft; and Barringer Technologies, costing £39m and making explosive and narcotic detection systems. They complement existing activities in these sectors. The increased threat of terrorism is being addressed by our Detection and Protection Systems business, with new equipment to identify dangerous substances being carried through airports.

While Aerospace performed strongly last year, the immediate outlook for the civil part of the business has deteriorated since the events of 11 September. Original equipment and aftermarket sales into this sector, £600m last year, are likely
to be affected in the period ahead. In contrast sales of defence equipment, for which the company has a secure order book, continue to grow strongly.
 
Sealing Solutions

	2001 £m	2000 £m
Sales	1,165	1,064
Operating profit	128	121

Our sales in Sealing Solutions improved by 10%, and the profits by 6%. After a strong first half, the division was later affected by a slowdown in some of its market sectors, particularly in the US and for industrial products in Europe. Margins remained at 11%, with the benefit of the current restructuring only showing through in the current year.

Viewed more closely, Sealing Solutions has operations involved in mechanical, polymer and marine sectors.

The largest, John Crane Mechanical Seals, increased its world market leadership in the metal and ceramic rotating seals used in process industries and in a range of high-volume industrial applications. While sales in oil, gas and petrochemical markets benefited from increased capital spending, the gain was offset by reduced demand for other industrial products, including vacuum and filtration systems, now in the process of being sold. John Crane's margins, which had fallen in recent years, have now been stabilised and will improve as the restructuring takes effect.

Polymer Sealing Solutions, specialising in high-technology plastic and rubber seals, achieved modest growth on the previous year. Sales increased in aerospace, medical and industrial applications, but sales into the automotive market were reduced.

Both John Crane and Polymer improved their competitive positions with new products for high-potential markets and by moving rapidly into e-commerce for their sales activity.

Looking ahead, we expect that organic growth in Sealing Solutions will be broadly related to GDP in its principal markets, although the cost savings we aim to achieve within the next two years will lead to an improvement in margins.