'Perfect 10' as Rolls-Royce rises above gloom to post another set of record profits
For the 10th straight year, Rolls-Royce has reported a rise in annual profits. And the success of Derby's largest private-sector employer is being driven by products made here in the city. Business editor Robin Johnson reports.
WHILE the UK economy struggles to get off the ground, Rolls-Royce seems to rise above it all with soaring profits, strong sales and a bulging order book. The company, which has its civil aerospace and marine power divisions in Derby, yesterday released another stunning set of annual results.
A year ago, Rolls-Royce, which is Derby's largest private-sector employer with 12,000 staff based in the city, announced its best-ever performance in its 100-year-plus history, with record profits, sales and orders.
But Rolls-Royce's results for 2012 were even better.
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The company announced pre-tax profits of £1.429 billion, a 24% improvement on the £1.157 billion it made in 2011. Sales improved by 8%, from £11.3 billion to £12.2 billion. And the firm's order book grew by 4%, from £57.6 billion to £60.1 billion.
What the results also means is that Rolls-Royce has achieved what could be termed as a "perfect 10" – 10 years of continuous, year-on-year growth.
Rolls-Royce Group has a number of divisions – civil aerospace, defence aerospace, marine, civil nuclear and energy.
Its Sinfin-based civil aerospace division is the largest business within the company.
In 2012, civil aerospace achieved profits of £727 million – an impressive 46% increase on its 2011 performance, when it made £499 million.
Last year, Rolls-Royce secured a number of significant orders for Derby-built Trent engines. They included Trent 700 engines for 54 Airbus A330s for customers including China Eastern, Etihad, Avianca, Synergy, Garuda Indonesia, Air Pacific and Skymark.
It secured orders for the Trent 900 engine to power 11 Airbus A380s belonging to Singapore Airlines and Skymark. Deals with Avianca and Air New Zealand were also agreed to supply Trent 100 engines to power five Boeing 787 Dreamliners.
And Rolls-Royce secured deals for Trent XWBs to power 30 Airbus A350 XWB aircraft for Cathay Pacific and Singapore Airlines.
The outlook for 2013 for civil aerospace continues to look rosy. The Trent XWB engine, which has been designed and developed in Derby, will play an important part in Rolls-Royce's future.
Despite the fact that it is yet to go into production, the XWB is Rolls-Royce's fastest-selling Trent engine.
Earlier this month, the XWB achieved a key milestone in its development by receiving its certificate of airworthiness from the European Aviation Safety Agency.
The certification paves the way for Airbus to fly the new A350-XWB aircraft for the first time this summer.
Eric Schulz, president of civil large engines at Rolls-Royce, said: "These results follow a year of continued progress on key engine programmes, with certification of the Trent XWB recently achieved and launched a more fuel-efficient, higher-thrust version of the Trent 1000, the Trent 1000 TEN."
The strength of the Rolls-Royce Group is one of its major keys to success. If one division has a difficult year, this is often offset by the performance of other divisions.
A year ago, Rolls-Royce reported that its marine division, which employs 2,000 people at the firm's Raynesway site, saw profits dip slightly in 2011, with its order book shrinking by 8%.
But 2012 was a better year. Its profits grew by 2% to £294 million and its order book jumped 44%, from £2.7 billion to £3.9 billion.
The order book was boosted thanks to a £1.1 billion deal with the Ministry of Defence to deliver reactor cores for the UK's nuclear-powered submarine fleet.
About £600 million is being used to develop two submarine reactors, one of which will be for a new Trident submarine – Britain's nuclear deterrent vessel.
And about £500 million is being used for the "regeneration" of Rolls-Royce's Derby factory to give it the capacity and technology to make the new reactors. The firm also revealed this week it had won an £800 million contract aimed at delivering and supporting the UK's nuclear submarine fleet.
The 10-year "foundation contract", which will secure the future of 2,000 Derby workers, is the first of three deals the MoD is expected to sign.
Despite a stellar performance in 2012, there are some challenges ahead for Rolls-Royce. Towards the end of last year, the company revealed it was in talks with the Serious Fraud Office over possible bribery and corruption relating to Indonesia and China.
Rolls-Royce is also likely to be quizzed about the effects of the Boeing Dreamliner affair, with the carbon fibre-based plane grounded because of battery problems.
But the past would suggest that the company is capable of overcoming such hurdles.
Chief executive John Rishton said: "The strength of our order book demonstrates the confidence our customers have in our products and services.
"In 2013, we expect modest growth in underlying revenue and good growth in underlying profit, with cash flow around break-even as we continue to invest for the future."