Exploding engine costs £56m and hit profits

Rolls-Royce revealed that the mid-air failure of one of its Trent 900 engines on a Qantas superjumbo cost it £56 million, contributing to a 20 per cent fall in underlying profits at its civil aerospace arm last year.

But the manufacturing giant saw group underlying profits grow 4 per cent to 955m in 2010 and predicted a further uplift this year. Group revenues increased to 11.1 billion, up from 10.4bn in 2009.

Derby-based Rolls, which has major operations in East Kilbride and at Inchinnan, near Glasgow, faced a reputational crisis in November when one of its engines exploded and forced an A380 superjumbo into an emergency landing.

The group said yesterday a "rapid and effective response" from all involved helped it identify the fault and return to normal service within weeks.Its entire Trent 900 fleet has been inspected and R-R paid out for most of the service and support costs, as well as settlements to affected customers.

Chief executive Sir John Rose, who is retiring next month after 15 years in the post, said the incident had not affected demand for the Trent 900 engine.

"Rolls-Royce has delivered a strong performance in 2010 with record underlying revenues and profits," he said. "It is a measure of progress that the civil, defence and marine businesses now each generate underlying profits of more than 300m. During 2011 the group expects good profit growth and a modest cash inflow."

Rolls' order book stands at a record 59.2bn, having booked 12.3bn in new orders in 2010.

The group has been benefiting from a strong business in emerging markets, which offset much of the downturn during the global recession. More than half its order book comes from emerging markets.

In presenting his last set of annual results, Rose said it had been "an extraordinary privilege" to lead Rolls, adding that he intended to take a "long holiday" after he retires. Rolls raised its final dividend by 6.7 per cent to 9.6p per share, giving a total of 16p. Shares dipped 5.5p to 650p.