Rolls-Royce today reported a 19 per cent rise in underlying profits on higher sales of its aeroplane engines and maintenance services.

The group, which is supplying engines to Airbus's new A380 superjumbo, reported underlying profits of £705 million in the year to December 31, compared with 2005.

The profits improvement came in spite of higher raw materials prices and a continuing deterioration of the dollar against the pound.

Revenues rose 14 per cent to £7.1 billion in the period, with growth across its civil and defence aerospace and marine businesses. Sales in its energy division dipped from £532 million to £512 million.

Sir John Rose, chief executive, reported record forward bookings, at £26.1 billion, an improvement on the £24.4 billion achieved in 2005.

He said: "We are pleased to have increased our order book, sales and underlying earnings in a challenging environment. These results strongly endorse the group's strategy and demonstrate the resilience and organic growth capabilities of our business model."

The group said it could also look to "dollarise" its costs, sourcing more of its raw materials and products from countries that use or peg their exchange rate to the US dollar, protecting it from further currency fluctuations.

Services revenues, an increasingly important part of the Rolls-Royce business, covering engine maintenance contracts, rose 13 per cent to £3.9 billion.

The group reported pre-tax profits after financing income of £1.4 billion for the year, up from £477 million in 2005. The company said the improvement was driven by a £696 million gain on foreign currency contracts used to insure against fluctuating exchange rates.

Sir John said each of the group's businesses offered significant organic growth opportunities.

The final dividend was increased by 10 per cent to 5.92p, giving 9.59p for the year.

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