Rolls-Royce revs up good news

AERO-engine giant Rolls-Royce helped drive the FTSE 100 higher yesterday after defying predictions of a fall in profits and announcing a record order book.

The City had expected Rolls, which makes engines and turbines for passenger planes, fighter jets, ships and power stations, to say that underlying profits in 2009 had been weaker than the previous year, but the figures showed a 4 per cent gain.

Chief executive Sir John Rose was also bullish about the future, saying the company's performance in 2010 should match last year in terms of revenues and profits, and that at the end of 2009 the order book stood at a record 58.3 billion. Shares responded to the guidance by rising 6 per cent or 31.7p to 520.5p.

Shares in London were broadly higher as European leaders indicated they would not allow Greece to go bust, announcing they would stand "shoulder to shoulder", without giving details of a plan.

The benchmark Footsie index closed up 29.49 points at 5,161.48, while the mid-cap FTSE 250 climbed 63.53 points to 9,127.85.

Mining firms were in favour after Rio Tinto recorded a 33 per cent increase in net profit for 2009 due to record sales of iron ore and an increase in copper and gold production. Rio shares jumped 76.5p to 3,216p, a gain of 2 per cent, while BHP Billiton lifted 45p to 1,901.5p and Antofagasta climbed 24.5p to 871p.

BT was the heaviest faller in the top-flight index, after warning that the pensions regulator has "substantial" concerns about its plan to cut its 9bn pension deficit. Despite stronger-than-expected results for the three months to 31 December, shares dropped 11.5p to 119.9p, their lowest close in six months.

Diageo shares fell after the drinks firm reported lower first-half profits as recession-hit drinkers switched away from premium brands towards cheaper lines. Shares in the company, the world's largest Scotch whisky distiller, eased 7p to 1,018p.

Persistent fears over government debts dragged the banking sector lower, with Lloyds Banking Group off 1.86p to 48.15p, despite announcing a sale of its stake in online insurer Esure for "slightly more than its book value" of 185 million.

Barclays fell 9.5p to 268.35p and Royal Bank of Scotland slipped 0.73p to 31.87p.

Oil explorer Cairn Energy was among the biggest gainers, up 8.6p at 337.2p, as crude oil rose for the fourth straight session on expectations of stronger demand.

Outside the top flight, shares in Sports Direct International jumped 8 per cent after it raised earnings guidance for the year to April. With Competition Commission officials also clearing its acquisition of 31 JJB stores, shares rose 7.7p to 104.7p.

Dragon Oil, the Dublin-based oil explorer rose 5p to 450p as Baillie Gifford bought another 4.3 million shares in the company to take its stake above 6 per cent.

Late in 2009, the Edinburgh-based fund manager helped block a takeover of Dragon, which is focused on the Caspian Sea, by its majority owner Enoc, the national oil company of Dubai.

Wolfson Microelectronics shares continued to surge in the wake of Tuesday's results, when the Scottish technology company predicted a return to profitability in the second half of the year.

Wolfson has seen a string of analyst upgrades since the results.

Yesterday, analysts at Jefferies slapped a "buy" rating on Wolfson, increasing their target price on the shares by 59p to 174p.

Citigroup increased its own target on Wolfson by 5p to 170p. Shares in the group closed up 1.75 per cent at 145.25p.