Demand for commercial jets and a pick-up in defence deals fuelled a 29 per cent rise in underlying 2005 profits for engineering group Meggitt - which has Dunlop Aerospace plants in Birmingham and Coventry.

Meggitt, which supplies Airbus and Boeing, yesterday said profits would not rise as fast this year but predicted two more years of solid results after it expanded in the buoyant aerospace sector through acquisitions.

Its shares, which have risen about 38 per cent in the past year, fell 3.4 per cent following the news, but analysts said the results met expectations and the stock was down on profit taking.

"They are rock solid numbers. Cash is good, dividends are good and a confident statement, but there is nothing adding a further dimension. The stock has had one hell of a good run," said Williams De Broe analyst Harry Phillips.

Earnings before tax and excluding amortisation and exceptional items came in at £116.3 million, compared with £90.3 million in 2004.

Chief executive Terry Twigger said he was comfortable with analysts' consensus forecasts for pretax earnings of around £129 million this year.

"Military markets are looking firm for us, and the civil aerospace side, both in terms of original equipment and the civil aftermarket, is growing quite strongly," he added.

"We can see a couple of years of good growth in front of the business."

New acquisitions, including its 2004 purchase of the Dunlop Aerospace operations, contributed £112.6 million to Meggitt's £616.3 million turnover for the year, up 29 per cent.

Aerospace, which accounts for three-quarters of the group's income, was buoyed by big defence orders, such as the second tranche of the Eurofighter combat jet, as well as record demand for commercial planes.

Meggitt makes engine monitoring systems and other equipment for Airbus's new double-decker A380 superjumbo.

The company also expects the bigger US airlines to recover from their problems and to start ordering new jets again in the medium term, if only to replace existing aircraft reaching the end of their lives, Mr Twigger said.

He said civil jet production was expected to rise by 21 per cent in 2006 and 11 per cent in 2007.

Mr Twigger added that Meggitt had realised £7 million of savings from its acquisition of the aerospace design and manufacturing operations of Dunlop, at the upper end of expectations at the time of acquisition, which is set to increase to £10 million in 2006 as further consolidation occurs.

"With the Dunlop acquisition fully integrated and trading in line with expectations, we look forward to continued growth in 2006," he said.

However, earnings at Meggitt's electronics arm were held back by weak automotive markets and were expected to remain soft in the first half of 2006 due to plans by some medical companies to reduce inventory levels.

Mr Twigger would not rule out major strategic acquisitions but said he was happy with the spread of the business.

The board declared a final dividend of 5.3 pence, up ten per cent, for a total dividend of 7.7 pence, also up ten per cent.