Aircraft engine manufacturer Rolls-Royce has defied the deteriorating economic climate by reporting a pre-tax profit of £880m for 2008, up 10 percent, and its order book growing 21 percent to £55.5 billion.
The Derby-based aerospace giant said it was too early to say what effect the downturn would have, but predicted profits in 2009 would be similar to those in 2008 and that underlying sales would rise.Sir John Rose, the chief executive, said that Rolls-Royce was resilient to much of the downturn because of its diversity and its move into providing long-term service contracts. Service work now makes up 52 per cent of the company’s sales.
He said: “Our well diversified portfolio, the scale of our installed base and the strength of our balance sheet give us confidence that Rolls-Royce will respond successfully to current challenges and develop the business for the longer term.”
Rolls-Royce said order cancellations last year were “modest” and restricted mainly to small corporate clients.
The company will increase its cash this year, partly in response to the economic climate. It said it will not need to consider refinancing till 2011.
However, the company expressed concerns that credit shortages could cause problems for some of its suppliers.
Last year Rolls-Royce announced job cuts of up to 2,000, which it blamed on project delays, including those with the Airbus A380 and the Boeing 787 Dreamliner.
“The group’s financial position remains strong and investors continue to enjoy a progressive dividend payment,” said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers. “Management continues to deserve credit for both the current business model and retaining faith in the virtues of manufacturing.”