Underlying revenue in the year to December 31 was £13.7b compared with expectations of £13.5b. The previous year it was £13.4b. On a statutory basis, revenue was £14.96b, compared with the previous year's £17.73b.
Warren East, chief executive, described the year as "an important one" for the company during which he "accelerated" his plans to reshape Rolls with new products coming on line and trim costs.
The better than expected performance was driven partly by the cost savings Mr East has introduced since he was installed as chief executive in the summer of 2015. These have included slashing 700 top managers and East said that his shake-up was "off to a good start, delivering savings of £60m in the first year, higher than £30m to £50m targeted".
By 2017 the programme is set to deliver savings at the top end of the £150m to £200m that is being aimed for, with the goal or reaching margins similar to rivals such as GE and Pratt & Whitney.
The huge loss at the headline level caused by writing down the value of Rolls' $38b of foreign exchange investments - known as a hedge book - was played down by East.
"This has no impact on what is really going on inside the business," he said, pointing out that the £4.4b write-down was a non-cash - or paper - charge.
The fines Rolls paid to settle corruption charges following an international investigation led by the Serious Fraud Office and working with regulators in the US and Brazil drew a line under what has long been an issue for the company, the chief executive said.
"We are continuing to work with the SFO on any enquiries they want to do," East said. "But as far as the SFO goes, that is it, as far as the US Department of Justice goes, that is it. As far as the major jurisdictions are concerned, that is it."
However, he conceded that other countries could still pursue Rolls over corruption. Judgments released last month by UK, US and Brazilian regulators detailed cases of bribery and corruption in a dozen countries including China, India, Indonesia, Nigeria Russia and Thailand.
The final dividend - which has been halved over the past year to help get the company back on track - is now 7.1p a share, giving a full-year dividend of 11.7p, compared with 16.4p in 2015.
East has said that he sees free cash flow as a better indicator of how the company is performing than profit.
Free cash flow measures how much money the company generates after essential spending needed to sustain the business.
The chief executive had indicated that he expected free cash flow to be "negligible" this year, the rising to £500m next year and £1bn the year after. The figure was actually £100m.
Analysts had been expecting negative free cash flow of £147m, meaning the company was burning through money.
Rolls announced a change to its board alongside the results, with long-time director Colin Smith planning to step down following the annual meeting in May.
Smith joined Rolls as an undergraduate apprentice in 9174 and worked his way up the business to key jobs including director of research and technology.
"Colin has devoted his entire career to Rolls and made a tremendous contribution," said East. "He was instrumental in developing much of today's portfolio of power systems and helping shape our technology plans for the future - his advice and insights will be greatly missed."
Finance director David Smith will step down at the end of March to go to a similar role at QinetiQ. He will be replaced by Stephen Daintith , who is joining from DMGT.
