Shareholder Executive

DARA

Purpose

The Defence Aviation Repair Agency (DARA) provided deep level maintenance, repair and overhaul (MRO) services for VC10 aircraft and Chinook, Lynx and Sea King Helicopters as well as a wide range of aircraft electronic/avionic systems and components. The Ministry of Defence defence-related work accounted for the majority of DARA's revenue, either directly to the MoD or as a sub-contractor to defence Original Equipment Manufacturers (OEMs). It merged with ABRO on 1 April 2008, creating a new single trading fund, the Defence Support Group (DSG).

Legal Status and Ownership

Before 1 April 2008, DARA was a trading fund of the Ministry of Defence.

Government Objectives

To provide a responsive, flexible and highly competitive service to the UK Armed Forces.

Financial Performance

£m	2008	2007	2006
Turnover	134	154	166
Operating Profit	10	10	(3)
Profit/(Loss) for the year	(27)	11	(2)
Net Cash Flow	5	(7)	(7)
Net Operating Assets	71	71	70
RONA	14.1%	14.1%	(4.3)%
ROCE	7.8%	7.8%	(2.4)%
Shareholders' Funds	18	125	123
Dividends	4	6	10

Commentary

This reporting period was again one of major change for DARA and its employees. It started with the Defence Equipment and Support Minister, Lord Drayson announcing in May 2007 his intention to merge the retained DARA business units with ABRO to create a single new trading fund. The Defence Support Group (DSG) would combine the land and air capabilities of both organisations and focus exclusively on supporting the UK Armed Forces. Following full trades union consultation, Ministers confirmed the merger in July 2007.

The Defence Support Group (DSG) began formal trading on 1 April 2008. Its remit is to focus solely on the delivery of the Defence Industrial and Technology Strategies by being a flexible, responsive, operationally excellent organisation that provides a cost competitive in-house maintenance, repair, overhaul and upgrade capability in support of the Armed Forces, while operating in partnership with industry.

Ministers also announced that the sale process of DARA's Rotary and Components businesses would continue with the aim of confirming whether sale would deliver the two primary objectives by being in the best interests of defence and providing a better long-term future for the businesses and their employees. A subsequent announcement by Ministers in July confirmed that Vector Aerospace was the preferred bidder and negotiations continued to help secure a successful conclusion and outcome. This was achieved with the sale completed by 1 April 2008.

Operationally, DARA achieved all its key targets in its final year of trading. With no major quality concerns, an increase on planned profit, reducing costs, better than anticipated efficiency targets and an improved return on capital employed (ROCE) against plan resulted in a notable trading performance that will allow DARA to fully exploit its strengths in the new DSG organisation.

The performance of DARA's various businesses has been impressive during a period in which many employees have been focussing on merger and sale, a tribute to those who have contributed in helping maintain DARA's focus and deliver an impressive output during periods of stress and uncertainty. The performances of the Large Aircraft business at St Athan, the Electronics business at Sealand and the Components business at Almondbank made a particularly significant contribution.

The Rotary platforms at Fleetlands have always faced major challenges and this year has been no exception. With the tempo in operations increasing, particularly in Afghanistan and Iraq, the pressure to keep troops equipped with the helicopters they need to carry out their duties was immense.

With the DARA Strategic Review now complete, the future is now clear for the DARA businesses whether these are inpublic or private sector ownership and employees can continue to concentrate on delivering vital support to the UK Armed Forces.