A revolutionary new factory in Glasgow is driving down costs at Rolls-Royce and propelling the engine maker towards revived profits growth despite falling sales, it emerged yesterday.

Rolls-Royce reported a 12% rise in underlying pre-tax profits to £285m, even though sales slipped 2.4% to £5.65bn as civil aero-engine deliveries fell 13% and are barely half their peak level of two years ago.

The new plant at Inchinnan, which will eventually produce 1m compressor aerofoils a year, employs 900 compared with the 1,800 working two years ago at the old Hillington factory which is being run down.

The plant's staff are all salaried and, according to John Challis, chief operating officer, are paid no overtime but enjoy performance bonuses instead. Last year they helped to reduce unit costs by 5%.

Sir John Rose, chief executive, said Inchinnan was a model for other new plants in Derby, Hucknall in Nottinghamshire and Bristol, which should be fully operational in 2006 when manufacture and assembly of all engines will have been cut to 40 days from 532 in 2001.

Shares in Rolls-Royce rose 15% to 213p, their highest level since September 2001 when the terrorist attacks in the US drove the stock into a decline that bottomed out at 70p in March last year.

Sir John said the figures, including a cut in net debt from £595m to £323m, the reduction of the pension deficit from £1.1bn to £855m as well as a record order book of £17.4bn, showed the business was maturing and robust. "In a tough environment we have managed to walk and chew gum."

Promising increased profits and lower net debt this year, Sir John said the post-September 2001 rationalisation programme - cutting the workforce by 8,000 to 35,200 - was now complete. But costs would continue to be taken out of the business.

Rolls, which hopes to supply engines for Boeing's new 7E7 Dreamliner passenger jet and for the new French aircraft carrier, now imports 70% of components from low-cost countries such as China.