ROLLS-ROYCE, the engine maker, has built a record order book worth £25.1 billion, equivalent to about three years’ worth of revenues.

Shares in the FTSE 100 company rose 5 per cent as the group said that its order book had grown by £5.1 billion in the first half of 2006. The deals included a $600 million (£325 million) contract from China Southern Airlines for Trent 700 engines and a $470 million order from Finnair for Airbus A350 engines.

Rolls announced its record order book alongside results for the first half that exceeded the City’s expectations. Underlying pre-tax profits rose 22 per cent to £324 million compared with forecasts of £305 million.

The market responded to the results, which shone against rising costs owing to a weakening US dollar and rising commodity prices, by sending Rolls’s share price up 21¼p to 442¾p.

Research and development costs rose 22 per cent to £346 million as the company seeks to build the next generation of fuel-efficient engines.

As part of this strategy it is investing £20 million a year developing fuel cells — a technology that may replace traditional fossil fuels in the future — in partnership with EnerTek Singapore.

The civil aerospace division increased underlying sales by 6 per cent to £1.78 billion and profits rose 23 per cent to £246 million. There are now 11,636 Rolls-Royce engines on passenger aircraft wings but Sir John Rose, the chief executive, was keen to highlight the company’s success in the after-sales market.

Engine overhauls, repair and servicing now accounts for 54 per cent of Rolls’s total sales and this division is expected to grow by about 10 per cent this year.

Rolls-Royce has also announced that it will develop a new engine, the Trent 1000, to power Airbus’s proposed A350 extra wide-body (XWB) aircraft.

The redesigned aircraft will require more powerful and more fuel-efficient engines to compete with Boeing’s 787 but Sir John insisted that this would not cause a significant increase in R&D expenditure.

Fuel efficiency is becoming as much of a concern in aviation as it is in the automotive industry and the pressure is on companies such as Rolls-Royce to reduce fuel consumption and emissions.

Sir John said: “What we are seeing is about a 1 per cent improvement in engine efficiency every year and our research and development is geared towards producing more environmentally friendly engines. We are focused on these areas of technology.”

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive