Rolls-Royce took a hit of STG56 million ($A89 million) after a mid-air fire on one of its Trent 900 engine used to power an Airbus A380 superjumbo flown by Australian airline Qantas.
The cost of the fallout partly impacted the group's annual net profit, which slumped 73 per cent to STG480 million ($A764 million).
Rolls-Royce was largely hit in 2010 by exceptional accounting charges, The British firm added in an earnings statement on Thursday.
It said that the 2010 profit figure compared with income after tax of STG1.799 billion in 2009 and added that the Trent 900 problem may result in "a modest level of additional costs" for the
company in 2011.
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Underlying performance was strong however, as Rolls reported better-than-expected pretax profits thanks to a buoyant order book.
Pretax profit climbed 4.0 per cent to STG955 million in 2010, while revenue gained 6.0 per cent to STG11.08 billion. Analysts had expected pretax profit of STG945 million and revenue of STG10.90 billion, Dow Jones Newswires reported.
"The strong order book and balanced portfolio gives us confidence that the group will double revenues organically over the next decade," Rolls said in its earnings statement.
"We continue to have the management and financial capacity to accelerate growth through acquisition and partnership."
Rolls-Royce's share price lost 1.53 per cent to 645.5 pence in late morning trade on London's benchmark FTSE 100 index, which was down 0.77 per cent at 6,004.54 points.
The company's results are the last to be presented by long-serving chief executive John Rose, who retires at the end of March, to be replaced by John Rishton, boss of Dutch retail group Royal Ahold.
"During 2011 the group expects good profit growth and a modest cash inflow," Rose said on Thursday. He joined Rolls-Royce in 1984 and has been chief executive since 1996.
Rolls was rocked in November after one of its Trent 900 engine caught fire in mid-air, forcing an Airbus superjumbo flown by Australian airline Qantas to make an emergency landing.
Rolls-Royce has said that failure of a "specific component" caused the oil fire, which led Qantas to temporarily ground its six A380s.
The mid-air engine blast on November 4 sent shards of metal raining down on an Indonesian island and punched a hole in the wing of a Singapore-Australia flight.
Rolls on Thursday said that safety of its products was the group's "highest priority."
It added in the earnings statement: "Each time a serious incident happens, Rolls-Royce and the aviation industry learn lessons. These are embedded in the rigorous certification requirements, safety procedures and standards of regulation which make flying an extraordinarily safe form of transport."
