Rolls-Royce plans to double its revenues within the coming decade, shrugging off the economic gloom that has settled over many other UK manufacturers.
“Many businesses have problems about where they are going to grow and how they are going to grow. We are blessed and cursed with choice frankly,” said John Rishton, chief executive of the aircraft engine manufacturer, whose profits increased by more than a fifth last year thanks to a strong performance in its maintenance and repair division as well as a joint venture with Daimler.
Revenues rose 4 per cent, led by after-market sales – or servicing the engines – while pre-tax profits rose 21 per cent year on year to £1.16bn, boosted by foreign-exchange rates and the acquisition with Daimler last year of German engines group Tognum.
Rolls-Royce underscored further growth prospects with a 5 per cent rise in its order book, to £62bn and Mr Rishton said the company was as confident today as it was two years ago that its revenues would double within a decade.
It expects its civil aviation and energy divisions to lead the way this year, helped by demand from emerging markets.
“In the markets in which we operate we still see growth and opportunities within developed parts of the world as well as the emerging parts of the world,” Mr Rishton said, adding that new orders were fuelling growth in countries such as China, India, Brazil and Russia. In mature markets, such as Europe, the need to shift to more efficient aircraft engines because of high fuel prices was buoying demand, he said.
Roughly half of the company’s engine order book comes from the developing regions of Asia and the Middle East, serving as a “pretty good proxy” for the company’s split between new capacity orders and replacement orders.
Rolls-Royce is one of the UK’s most respected and influential engineering companies and Mr Rishton was not shy about suggesting that the UK government look to its long commitment to engineering as a guide to rebalancing the economy.
He said the UK was merely at the start of a long process, one that needed to include improving the image of engineers.
“We make heroes both positive and negative out of investment bankers,” Mr Rishton said. “We raise their profile, we make films about them. Kids talk about it the same way they talk about celebrities. Many people think an engineer is someone who repairs your car at a garage,” he added.
The company raised the dividend by 9 per cent to 17.5p, paid out from earnings per share that were 25 per cent higher at 48.5p.
Shares fell slightly in early trading, to £7.75 after reaching all-time highs last week.
They had stumbled last month when analysts raised concerns about slackening demand from both civil and military aircraft makers. But the company pointed on Thursday to a 7 per cent rise in its civil aerospace order book – which represents more than 80 per cent of the group total – including an exclusive deal to build the engine for Airbus’s A350-1000 aircraft.
The defence order book fell by 7 per cent, to £6bn, but the division’s bottom line was shored up by a £60m payment from the Ministry of Defence for cancelling contracts following a spending review.
Mr Rishton said continued investment across the group’s divisions meant cash flows would stay steady in 2012 even as revenues and profits looked set to rise.
Analysts at Investec called the full-year results “solid”, “with the prospect of continued long-term growth underpinned by the order book, growing after-market sales and contribution from Tognum”.
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