Rolls-Royce Group plc announces Preliminary Results 2007

The Group said it made strong progress in 2007, delivering underlying sales and profit growth across all its businesses.

Access to growing international markets resulted in a strong order intake across all its businesses. By the end of the year, the order book had increased by 76% to reach a record £45.9bn (2006: £26.1bn).

The order book for Asia and the Middle East more than doubled and finished the year at £20bn - the same level as the total value of the Group's order book just four years ago. In the Middle East, orders reached £3.9bn

New orders were secured in countries in which the Group previously had little or no presence.

Underlying Group sales increased from £7,353m to £7,817m, of which services sales increased by nine per cent to £4,265m on an underlying basis.

Underlying profit before taxation increased by 13% in 2007 to £800m and underlying earnings per share increased 14% to 34.06p/share.

The Group reported good cash flow despite the continuing challenges of a weak US dollar and increased unit costs. Net cash inflow, before a special contribution of £500mn into the UK pension schemes, was £562m (2006: £491m). Average net cash was £350m (2006: £150m), after reflecting the pension scheme contribution.

Sir John Rose, Chief Executive, said today: 'We have delivered a strong set of results in challenging conditions. The breadth of our product and service portfolio, our access to expanding global markets, and our focus on productivity and efficiency gives us confidence that Rolls-Royce will continue to deliver profitable growth.'

'A good illustration of the strength of our strategy is the increasing breadth of our order book, which is now well balanced between the Americas, Europe and Asia Pacific. The order book for Asia and the Middle East alone finished the year at the same level as the total value of our order book just four years ago.'

The Group said the consistent strategy it had pursued over many years had created a business which is delivering increasing predictability of future revenues as a result of the breadth of the portfolio, the access to growing and global markets and the strength of the aftermarket.

Three major engine programmes were launched in 2007, for Dassault Aviation's new super-midsize Falcon business jet, for the Airbus A350 XWB and for the Robinson R66 helicopter.

As a long-term business, Rolls-Royce has continued to invest in the future. In 2007, investment in research and development totalled £824m (2006: £747m) of which the Group funded 55%.

A key milestone and a reflection of the increasingly international nature of the Group's research activity was the decision by the United States Air Force to select Rolls-Royce for ADVENT (Adaptive Versatile Engine Technology) and HEETE (Highly Efficient Embedded Turbine Engine), two major new programmes which will deliver the next generation of technologies for advanced propulsion systems.

Rolls-Royce has continued to focus on simplifying its organisational structure, improving productivity and developing global capability. The programme to renew UK factories was completed in 2007, and in November plans were announced for two new aero engine assembly facilities in Singapore and Virginia. Simplification and rationalisation of the international supply chain has continued, with resulting performance improvements.

As part of the drive to improve efficiency, proposals were announced earlier this year to reduce by 2,300 the number of people employed on overhead and support functions.