Rolls-Royce posted a 49 per cent rise in profits yesterday as it showed why its shares were one of the best performers on the stock market last year.

The firm said pretax profits jumped on a like-for-like basis to £584 million in 2005, following continued strong growth in its after-sales services arm.

That sector drove Rolls' recovery from the aviation downturn seen after the September 11 terrorist attacks in the United States and helped send overall sales up nine per cent to £6.6 billion.

Rolls share price rose by 73 per cent during 2005 as investors tuned into the company's improved performance.

The company also benefited from strong demand for aircraft engines as it took a record number of new orders worth £11.3 billion in 2005.

The increased demand for new engines and maintenance of already installed engines sent its year-end order book up 21 per cent to £22.9 billion - its highest ever level.

Sales in civil aerospace hit £3.51 billion while its defence arm was up to £1.41 billion and marine business grew to £1.1 billion.

Highlights in 2005 included the successful maiden flight of the Airbus A380 - powered by the Rolls-Royce Trent 900 engine - and an agreement with Airbus to supply the Trent 1700 engine to power the new A350 aircraft.

In the defence sector, Rolls said it was given a boost by a deal between the UK Government and Saudi Arabia which

will see the Royal Saudi Air Force supplied with the Eurofighter Typhoon fighter plane - powered by Rolls' EJ200 engine.

Rolls chief executive Sir John Rose said: "Growth in our sales and order book and our consistent focus on improved efficiency underpin our expectation of further growth in profits and positive cash flow in 2006."

Sir John added that Rolls-Royce would continue development work on a second engine for the Joint Strike Fighter combat jet, despite a 2007 US defence budget request which has dropped planned funding.

"It's fully funded for this year," he said. "It's a development programme, not a production programme, and we'll continue to work on it."

President George Bush rejected appeals to the US from Tony Blair to retain the plan for a second engine, which had resulted in a £1.36 billion development contract from the Pentagon for Rolls and US rival General Electric.

Rolls is also holding the door open to potential changes in its pension arrangements, after the deficit on the group's plans rose by 15 per cent to £1.154 billion during 2005.

But Sir John declined to say whether Rolls plans to follow in the footsteps of other FTSE-100 companies by switching from relatively generous final salary pension arrangements to defined contribution, or money purchase, schemes.

Shares in Rolls slipped one per cent following the results, but analyst Andrew Gollen at Numis Securities said the decline was down to profit taking following a very strong run rather than disappointment at the figures.

"They are a very good set of results," he said. "They are stronger than most people forecast. The share price has eased off a touch simply because Rolls has had such a good run.

"The fundamental story is very positive indeed. Rolls is moving in the right direction."