Rolls lined up for 2003 take-off

A SURPRISE £3bn glut of orders for new airliner engines in the weeks after 11 September boosted Rolls-Royce last year but left it with a problem in the current year.

Engine sales will stall this year, as the civil aviation industry responds to a decline in passenger numbers by cutting on new airliner orders. That will delay a Rolls-Royce profits take-off until 2003, chairman Sir Ralph Robins warned.

The rise in new engine sales after the World Trade Centre tragedy came despite Robins's predictions last October of a halving in new engine earnings. However, this year new engine sales will be down 30%, he warned, and the unit's profits less than half their 2001 level.

Robins said: 'We are well positioned for profit growth in 2003, relative to 2002.' Robins retires within the next 12 months. The stock topped the FTSE 100 risers at one stage, and traded 10p higher at 180p by mid-afternoon.

Pre-tax profits before exceptionals rose by 9% to £475m in the year ended December. Robins described this as a 'robust performance' which justified the strategic management changes made by the group in recent years and its prompt action 'to mitigate the financial impact of the events of 11 September' - it axed 5,000 jobs. There is an unchanged final dividend of 5p a share, making a full-year dividend of 8.18p, a 2.3% increase over last year.

In 2001 the group increased its order book to a record £14.4bn, with a further £2.3bn worth of orders due to be signed on. Despite the collapse in the civil aviation market after 11 September the group managed to take orders before the year-end worth £3bn.

In 2002 a total of 900 civil engines will be delivered. It has engineering interests in 9,000 civil jet engines throughout the world supplying spares and service. It also has a thriving military engine market and will supply marine engines for Britain's latest Type 45 destroyers.

Rolls-Royce expects to complete most of the job cuts by the end of the first quarter of 2002. This and other measures will cut £250m from costs. Talks with Alvis over the future of Rolls-Royce-owned Vickers Defence Systems, which makes Challenger 2 tanks, are continuing.