Rolls-Royce, Derby’s biggest private sector employer, has reported its best year since it was founded more than 100 years ago. Business editor Robin Johnson looks at how it was achieved.

If Charles Rolls and Henry Royce were around today then they would probably afford themselves a celebratory drink.

Maybe they would decide to go to the Midland Hotel, in Manchester, the place where they met for the first time more than 100 years ago, to toast the record-breaking profits of the Derby company they founded.

Yesterday, Rolls-Royce announced a superb hat-trick of record profits, record sales and a record order book.

After more than a century in business, to attain such results is quite an achievement but to do so in the current economic climate makes it all the more remarkable.

Like any company that has been around as long as Rolls-Royce, the journey has not always been smooth.

The company has had to endure some challenging moments – not least the time when it called in the receivers during the infamous Rolls-Royce “crash” of 1971, when the RB211 project ran way over budget.

Government intervention – and investment – brought it back from the brink.

The fact Rolls-Royce announced its record profits on the same day that another Derby manufacturing stalwart, train-maker Bombardier, confirmed it would be staying in the city, has particular resonance.

Bombardier is a company eager for government help – in the form of new contracts.

Hopefully, ministers will see from Rolls-Royce’s story what can be achieved if it backs British manufacturers.

In recent years, Rolls-Royce has also had to overcome other challenges, such as the dramatic fall in demand for aero engines caused by the 9/11 terrorism attacks.

And, as recently as 2010, its name was in the headlines when a Derby-built Trent 900 engine exploded on an Airbus A380 aircraft, operated by Australian airline Qantas, forcing it to make an emergency landing at Singapore.

The issue with the engine was resolved, airlines kept faith with Rolls-Royce and the company continued to receive orders for the Trent 900.

Rolls-Royce worked its way through the crisis and continued to secure deals and develop market-leading engines demanded by customers all over the world.

The fruits of its labours were revealed yesterday, when it announced its annual results. They showed profits had burst through the £1 billion mark for the first time in the company’s history.

The firm, which has its civil aerospace and marine divisions in Derby and employs about 12,000 people in the city, revealed profits had risen from £955million in 2010 to £1.16billion last year.

It also reported a record order book, which last year grew by 5% to £62.2 billion and it also enjoyed record sales, which were up 4% to £11.3 billion.

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 2011, it got back on track after taking a hit because of costs incurred following the Qantas incident. It was back in profit, achieving £499 million – a 27% increase on its 2010 performance when it made £392million.

It also increased its order book by 7% to £51.9 billion and delivered 116 more engines, from 846 to 962.

In 2011, Rolls-Royce secured new orders for more than 200 Derby-built Trent engines.

Major orders included Trent XWBs for up to 60 Airbus A350 XWB (extra wide body) aircraft for AirFrance KLM Group.

Oman Air placed orders for Trent 1000 engines to power six Boeing 787 Dreamliners, while Skymark Airlines and Asiana ordered Trent 900s for six Airbus A380s.

Singapore Airlines and Cathay Pacific both ordered Trent 700 engines to power fleets of Airbus A330 aircraft.

Mark King, Rolls-Royce’s president of civil aerospace, said: “Our order book now contains more than 2,400 large engines and we have also seen continued growth in earnings from our support services.”

A major high point of 2011 was the Boeing 787 Dreamliner finally going into service with launch customer All Nippon Airways, after several years of delays.

The Dreamliner is a lightweight aircraft, powered by Rolls-Royce, which is more fuel-efficient than its rivals.

Work is also progressing well on a Rolls-Royce engine that has not even gone into production yet – the Trent XWB. It has been designed and developed in Derby, to exclusively power the new Airbus A350 XWB. It is currently being put through its paces, with more than 1,500 test hours already under its belt.

Mr King said: “We continue to move forward with our latest engine programmes. The Trent 1000 is now in service on the Boeing 787 Dreamliner and performing very well, while the Trent XWB programme continues to meet all targets as development and testing continues.”

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.

For example, Rolls-Royce’s marine division, which employs 2,000 people in Derby’s Raynesway, had a more challenging year in 2011. Its profits fell by 3% to £323 million and its order book shrank by 8% to £2.7billion. But new orders went up by 15% to £2.1 billion, providing evidence of recovering demand.

According to chief executive John Rishton, who took over after Sir John Rose retired last year, Rolls-Royce has increased the strength of its group through the acquisition of German engine-maker Tognum.

The joint deal with Daimler saw Rolls-Royce splash out £1.4 billion on the deal. Mr Rishton is confident it will reap dividends.

Rolls-Royce has also been looking closely at its own businesses and relationships.

Last year, it decided to sell its stake in the International Aero Engines consortium for £950 million and instead started a joint venture with Pratt and Whitney.

Mr Rishton said: “Rolls-Royce performed well in 2011. We continue to benefit from a broad portfolio, a large and growing customer base and access to markets where demand remains strong for our products and services. Our order book gives us good visibility of future revenues and demonstrates the confidence our customers have in us.

“We see opportunities for profitable growth across our portfolio. In particular, the acquisition of Tognum, that we made in partnership with Daimler, adds to the breadth of our portfolio and will accelerate growth.

“For 2012 we expect good growth in both underlying revenue and underlying profit.”

PRAISED STAFF HOPING FOR 'POSITIVE RESPONSE' TO PAY CLAIM

UNIONS at Rolls-Royce are hoping the company will give "a positive response" in light of its remarkable performance.

Last year, the workforce received a 5% pay increase.

This year, the unions have asked for 1% plus inflation – based on the Retail Prices Index, which currently stands at 4.2% – or a flat 6% increase.

Mark Tittley, joint chief negotiator for Unite (Staff), which represents 3,000 workers at Rolls-Royce in Derby, said: "I think these results are excellent news for the company and the workforce, particularly the Rolls-Royce staff at our Sinfin and Alvaston sites.

"The results show the hard work that has been put in by the entire workforce.

"On the back of these trading results, I hope the company will provide a very positive response to the UK staff pay claim that we submitted this week."

Rolls-Royce declined to comment on the pay negotiations but, following the publication of yesterday's results, Mark King, president of civil aerospace at the company, did recognise the contribution made by the workforce.

He said: "I would like to thank our employees in Derby for their contribution and hard work."