Engines like this Trent 970 engine on a British Airways Airbus A380-841 have dominated Rolls-Royce's order book

New engines boost Rolls-Royce orders to record level

Surging demand from airlines for new engines propelled Rolls-Royce's order book 15 per cent higher to a record £70bn.

The engineering giant said orders including a $4bn (£2.6bn) deal with Singapore Airlines to power 50 Boeing 787 Dreamliner aircraft boosted demand for its civil engines 14 per cent to £56.7bn, as it reported a big jump in half-year profits.

Underlying pre-tax profits leapt 34 per cent to £840m during the first six months of the year, lifted by more work and restructuring, as shares rose 3 per cent to match a record high after the results beat City expectations.

Revenues were 27 per cent higher to £7.3bn, driven by surging sales across its civil, defence, marine and energy divisions, but the firm is to focus on cutting "unacceptable" levels of costs.

Rolls, the world's second-largest maker of aeroplane engines behind US group General Electric (GE), lags its major competitors in terms of managing costs and needs to narrow that gap, chief executive John Rishton said.

He said an increase of £261m in inventory was "disappointing". US rival GE has cut costs aggressively, including making layoffs, and has sliced expenses by $474m at its industrial engine making unit so far this year.

"While underlying profits were up 34 per cent our costs are rising faster than revenues, which is not good enough and needs to change; we have a lot more to do on costs and cash," Rishton told reporters.

Orders for Trent engines for large aircraft dominated Rolls' order book, helping it grow market share. The firm hailed a milestone with its most efficient Trent XWB engine when it powered an Airbus A350 jumbo jet for the first time in June. It has already booked 1,400 orders for the engine, which will help reduce jet emissions by 16 per cent.

Underlying profits in its civil aerospace arm leapt 59 per cent to £486m, as engine deliveries increased 11 per cent to 346 as it won orders from carriers including Air China, Hong Kong Airlines, United Airlines and British Airways owner International Airlines Group.

Surging engine orders helped it shake off concerns about quality, despite facing an on-going legal dispute with former employees about an alleged cover-up of poor procedures in the US, plus recently admitting it "clearly fell short" of the highest standards when one of its engines disintegrated on the world's largest passenger plane.

A final report by Australian investigators into the November 2010 incident aboard a Qantas Airbus A380 superjumbo with 440 passengers aboard said the engine explosion, which caused the temporary grounding of 20 planes with Trent 900 engines, was caused by a poorly-built oil pipe that failed to meet design specifications.

The group's total order book hit £69.2bn, compared with £60.1bn a year earlier, but squeezed military budgets shrunk its defence order book 4 per cent to £4.9bn.

The group, which has major sites at Derby and Bristol and employs around 45,000 people worldwide, said a probe into alleged bribery and corruption in Indonesia and China continues.

The claims are being investigated by the Serious Fraud Office (SFO), but Rolls gave no update on what the penalties could be or when it will be concluded.

Rolls' net cash fell £396m to £921m, and the group said a £261m increase in stock and inventory holdings was "disappointing".

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