Looking ahead to 2005, Rolls-Royce had "a record order book, strong positions on a new generation of programmes and a growing services business", chief executive John Rose said.

"These factors, supported by our investment in operational efficiency, underpin our expectation of continued growth in profits and reduction of average net debt," he added.

The group enjoyed a 9.0 percent rise in year-end firm orders for 2005 to 18.9 billion pounds (27.4 billion euros, 35.1 billion dollars), the company said in its full-year results.

Rolls-Royce saw underlying pre-tax profit -- before exceptional and non-trading items -- grow to 345 million pounds in the twelve months to December 2004 compared with the previous year.

Profits were boosted by a 5.0 percent increase in group sales to 5.94 billion pounds.

The aircraft engine maker said the results -- at the upper end of analysts' consensus forecasts -- were driven also by a better-than-expected recovery in the civil aerospace market.

"The four sectors of the power systems market on which Rolls-Royce is focused -- civil aerospace, defence aerospace, marine and energy -- all enjoy strong demand trends stretching well into the future," the company said in a statement accompanying the results.

Rolls-Royce shares dipped 3.31 percent to 262.5 pence in afternoon London trade after the company maintained its annual dividend at 8.18 pence a share.

The Rolls-Royce board was adopting a "sensible and prudent policy" on dividends, finance director Andrew Shilston said.

"We're still carrying an average of 560 million pounds of debt on our balance sheet and we'll be looking for a further reduction on this in the coming year," he said in a conference call to reporters.

Broker Merrill Lynch kept its 'neutral' rating for the stock in spite of the move, adding:

"We believe this is because... they want to continue to re-build the balance sheet and up the credit rating.

"Given the excellent cash flow, the only area of possible disappointment is that they kept the dividend flat," they added.

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