ENGINE maker Rolls-Royce has reported a record order book as the group sought to banish memories of last year's surprise profit warning.

Rolls delivered an upbeat report on progress despite seeing underlying pre-tax profits for the six months to June 30 dip slightly to £190m.

Sir Ralph Robins, chairman, said all of the group's businesses had made progress despite challenging economic conditions.

He said: "These results demonstrate the importance of the strategic changes made by management over recent years."

The company said it was encouraged by an order book worth £14.9bn at the half-year stage - an improvement on the £11.8bn at the same time last year.

The underlying profits figure, which compared with £195m a year earlier, reached the upper-end of City expectations.

A 15 per cent lift in overall sales to £3bn was driven by £1.71bn worth of business from the civil aerospace division, which has a Sunderland operation employing 500 staff.

That represented a £374m improvement on the same period last year and was helped by strong demand for the Trent family of engines.

In the defence business, sales dipped to £639m from £696m last time, although Rolls said engine deliveries for the Eurofighter programme would start to show in figures later this year.

About 40 such engines should be delivered this year, increasing to about 100 engines in 2003.

However, Rolls said the performance of its energy division continued to be affected by the cost of technical issues relating to new products.

The division, which makes industrial power generators, was the prime reason for the woes of last summer when Rolls reported a 76 per cent fall in overall half-year profits. Shares dived 19 per cent as a result.

That drop was driven by the £120m cost of developing new emissions technologies.

Yesterday, Rolls said it expected the performance of the energy business in the second half of the year to be in line with the most recent six months, when the division made an underlying loss of £48m.

Shareholders will receive an interim dividend of 3.18p a share, an increase of six per cent on last year.