BAE and Rolls are seeking clearer skies

SENSITIVE skin is normally an issue for cosmetics makers, not defence companies.

But engineers at BAE systems’ Advanced technology labs are experimenting with making human-like skin for planes, so that aircraft will be able to feel the world around them and sense if they are damaged.

the ‘smart-skin’ is made up of tiny sensors. each has its own power source and, paired with software, can send messages about the state of the aircraft in a similar way that the human skin sends signals to the brain if it is hot, cold, or grazed.

Developed by senior research scientist Lydia Hyde, the sensors are so small they could even be ‘spray-painted’ on to old aircraft.’ this project is just one of the amazing developments undertaken by defence giant BAE, and its fellow engineering titan rolls-royce.

Yet despite the expertise of their scientists and engineers, the pair have undergone a torrid time.

BAE, up 3.5p at 473.1, posted underlying profits for the first half that are steady at £800m, and a dividend up 2pc to 8.4p. Although it has had a torrid time in recent years including a failed merger attempt with european giant EADS, the view on the market is that it is past the worst.

It needs to secure new aircraft orders for the eurofighter typhoon if it is to hit earnings targets. But chief executive Ian King is confident that the backdrop for military spending here and elsewhere is far more positive than at the time of the last major review five years ago.

‘this time, there is more stability and more certainty,’ he said, adding that in the Us ‘we expect we will see modest growth coming through.’

King also expects more spending on cyber- security, an area where BAE is expanding. ‘It is firmly on everyone’s agenda,’ he says.

rolls-royce is some way behind BAE on the road to recovery. the markets were braced for a poor showing after new chief executive Warren east issued a profit warning at the start of this month only two days into the job.

Pre-tax profit fell by 57pc to £310m, with the underlying figure was down 32pc to £439m. the shares rose 19p to 749.5p and the divi was up 3pc to 9.27p a share.

rolls is in a transition phase moving from older, higher margin engines such as the trent 700 to newer ones such as the XWB. It faces questions over the efficiency of its production, the shape of its business and its accounting policies, which many analysts find hopelessly opaque.

‘If I could wave a magic wand and change the accounting policies I certainly would, because I find them confusing,’ east admitted.

Instead the accounting practices will wither on the vine. this is because the sale of engines is being decoupled from the sale of the serv- ice contract, which should make the accounts easier to decipher.

‘Projecting forward, only about 20pc of sales will be linked and 80pc will be unlinked, so the accounting will get progressively simpler,’ east said. ‘there have been questions about communication with financial community generally.

‘We accept we need to change the fundamental basis on which we communicate with the city.’

He downplayed suggestions rolls might seek to dispose of its ‘ land and sea’ business, that supplies engines to the energy industry.

east took the helm from John rishton after a horrible period in which it issued a string of profit warnings, saw its first fall in sales for ten years and is being investigated by the serious Fraud Office over bribery and corruption allegations.

so has east bitten off more than he can chew at rolls? ‘no, not really. I am not at all fazed,’ he says.