Key performance indicators	2008	2007	2006	2005	2004
Capital expenditure £m	283	304	303	232	191
Product cost index – year-on-year (increase)/decrease %	(4)	(7)	(5)	0	5
Sales per employee £’000	233	193	192	186	169

Our supply chain provides parts for both the original equipment and aftermarket areas of our business. It responded extremely positively to a significant increase in demand from all sectors, supporting a growth in underlying revenue of 17 per cent in 2008. New product introductions and the impact of programme slippages were also managed effectively.

Through our make/buy strategy, we continued to focus on making only those parts which are rich in intellectual property in order to maximise value. The strategy was underpinned by ongoing supply chain rationalisation and the development of strategic supplier relationships, exemplified by the agreement of risk and revenue sharing partnerships for 40 per cent of the Trent XWB programme.

Business process improvements and the ongoing roll out of new process systems like SAP and PLM continued to drive operational efficiency, for example enabling the reduction of 2,300 jobs in support functions. As a result, productivity measured as underlying revenues per employee, improved by 18 per cent on 2007. Our modern domestic factories continued to improve their productivity. However, commodity prices resulted in a product cost index rise of four per cent.

A range of new product introductions was managed during the year, with the first run of the BR725 engine for the Gulfstream G650, first flight of the F-35 STOVL variant for the Joint Strike Fighter (JSF) and plans established to deliver orders for the MT30 naval gas turbine and the JSF LiftSystem. We also successfully rephased our production programmes for the Trent 1000 and 900 engines in response to programme slippages on the Boeing 787 and Airbus A380.

In the medium to long term, our record order book will drive a significant increase in the load on our supply chain, though the timing of this increased activity will be affected by programme slippages and the economic downturn. We are phasing the development of our new manufacturing facilities in Singapore and Crosspointe, US, to take account of these impacts in order to meet demand in a timely fashion.

In November 2008, we announced proposed global job reductions for 2009 of around 1,500-2,000, as a result of economic uncertainties and individual programme developments. We will continue to recruit graduates, apprentices and other employees in order to support areas of particular growth.

Our Business Process Improvement programme continued to direct spend on information technology. We continued to introduce our design and data management tool, PLM, and our planning and scheduling tool, SAP, notably into Hong Kong Aero Engine Services Limited (HAESL), our Hong Kong repair and overhaul joint venture. Our services processes will be further enhanced in 2009 with the application of the Maximo planning tool.

We expanded our capability during the year, establishing strategic joint ventures with GKN plc, to develop composite materials for fan blades, and Goodrich Corporation, to develop and manufacture engine controls.

Our success is based on operational excellence, strong partnerships and technological superiority. We would like to thank all our employees, suppliers and partners for their commitment to these core principles and for their hard work during the year.