Chief executive Sir John Rose said its civil aerospace operation was "not immune" to higher oil prices and economic slowdown. But he added that demand for newer wide-bodied aircraft remained strong, while the group’s other marine and energy divisions performed well.

"We are confident that we will continue to deliver profitable growth and positive cash flow for the full year," he added.

The group, which has major UK plants at Derby and Bristol, posted underlying pre-tax profits of £410 million for the first half of 2008 – 8% ahead of last year and slightly ahead of City forecasts.
Shares rose 3% as markets were cheered by the results. Rolls-Royce grew its order book by £7.6 billion to £53.5 billion in the first half of the year, with growing Asian and Middle East markets now accounting for 40% of the total.

The company said its civil aerospace operation saw increased activity despite the financial squeeze from fuel costs and slowing economic activity. It said demand for existing wide-bodied aircraft had been helped by delays to the Airbus A380 and Boeing 787 programmes, which had reduced planned capacity over the next three years.

The relative youth and fuel-efficiency of its aircraft engines – and its lower exposure to older narrow-bodied models – would see fewer Rolls-Royce-powered planes grounded, the firm added.

The growing number of its engines should also support aftercare servicing and maintenance revenues, which accounted for 53% of the group’s £4.21 billion sales in the first half.

Oil prices boost marine & energy
High oil and gas prices have meanwhile helped its marine and energy business after a surge in exploration activity.

The marine business, which makes engines for commercial and naval ships, saw a 17% jump in orders as the oil industry increasingly turns its attention to deep water and off-shore exploration. Underlying profits rose nearly 50% to £87 million.

Energy, which makes gas turbines for oil, gas and power generation markets, lifted orders 10% to £1 billion after wins in Australia, Russia and South-East Asia. The company is also establishing a new nuclear unit to take advantage of opportunities arising in the UK market.

The group added that 1,900 of the 2,300 staff cut in January to reduce costs had left, with the remainder to go by the end of the year.