Re Contract

10 February 2003

          MOD AND ROLLS-ROYCE SIGN SERVICE CONTRACT WORTH £60 MILLION          

The Ministry of Defence (MOD), and Rolls-Royce plc have announced the award of
an innovative service support contract worth some £60 million ($100m) for the
Gnome engine which powers the MOD's fleet of Sea King helicopters.

The initial five-year contract will deliver significant cost of ownership
benefits consistent with the MOD Defence Logistics Organisation (DLO) objective
of achieving a 20 per cent reduction by 2006.

Captain Simon Baldwin RN, Helicopter Engine Integrated Project Team (HEIPT)
Leader said: 'This new contract is the most extensive established by HEIPT with
an engine contractor. It is designed to introduce innovative support solutions
and deliver reduced cost of ownership. This is genuinely a `win-win' contract,
an excellent example of MOD and industry working together to deliver Smart
Acquisition. This first contract will enable us to achieve our immediate goals
while providing for further savings to be shared through performance
incentivisation.'

The HEIPT is one of the DLO's Equipment Support (Air) Integrated Project Teams
and has responsibility for the in-service support of all UK military helicopter
engines.

The focus of the HEIPT and Rolls-Royce will now shift to extend the scope of
the Gnome contract and work to put in place similar contracts for other Rotary
Wing engine types, commencing with the Lynx Gem engine.

Colin Green, President - Rolls-Royce Defence Aerospace, said: 'This is the
latest example of Rolls-Royce and its customer partnering to develop a tailored
service solution that meets the requirement of improving the operation while
reducing the costs. We are keen to extend our Mission Ready Management
Solutions (MRMS) offerings to other Rolls-Royce engines in-service with the
MoD, as well as to our international customers.'

Under the terms of the contract, Rolls-Royce is the prime contractor for all
depot repair and overhaul activity, to include full responsibility for spares
provisioning, inventory management, technical and logistics support. In order
to deliver sustained cost of ownership, Rolls-Royce has committed to
significantly improve repair turnaround times and engine reliability. Both of
these key performance metrics are covered by an incentivisation agreement and
subcontractors are also encouraged to share best practice. Rolls-Royce will
undertake repair and overhaul work at its facilities at Ansty, England and
Oberursel, Germany, in addition to the Defence Aviation Repair Agency (DARA)
facility at Fleetlands, England.

This innovative support arrangement is the first using Rolls-Royce's MRMS
concept which was launched in direct response to the MOD's Smart Acquisition
initiative. Under this partnering contract the firm pricing incentivises
Rolls-Royce to seek profit on performance rather than cost.

Notes to editors:

Equipment Support (Air) is part of the Defence Logistics Organisation (DLO),
which was formed as part of the Strategic Defence Review in April 2000.

Equipment Support (Air) aims to provide logistics support to all three Armed
Services: RAF, Royal Navy and Army supporting over 1,000 aircraft in some 30
fleets. Equipment Support (Air) employs around 4,500 people across the UK and
overseas.

Rolls-Royce plc operates in four growth markets - civil aerospace, defence
aerospace, marine and energy. It is a global company investing in technology
and capability that can be exploited in each of these sectors to create a
competitive range of products.

The success of these products is demonstrated by the company's rapid and
substantial gains in market share over recent years. As a result, engine
deliveries have grown and the company now has a total of 54,000 gas turbines in
service worldwide. The investments in product, capability and infrastructure to
gain this market position create high barriers to entry.

Rolls-Royce has a broad customer base consisting of more than 500 airlines,
4,000 corporate and utility aircraft and helicopter operators, 160 armed forces
and more than 2,000 marine customers, including 50 navies. The company has
energy customers in nearly 120 countries. Rolls-Royce employs around 38,000
people worldwide, including 23,500 in the UK, 5,000 in the rest of Europe and
8,000 in North America.

Most of the engines in service will have operational lives of 25 years or more,
generating an assured aftermarket demand for the provision of spare parts and
services. The company's strategy is to maximise aftermarket revenues through
the development of a comprehensive services capability.

Annual sales total around £6 billion of which over 40 per cent currently comes
from aftermarket services. The order book stands at more than £19 billion,
which, together with aftermarket demand, provides visibility as to future
activity levels.

For more information contact

Equipment Support (Air) Media Enquiries

Tel: [phone] x 6973

Fax: [phone]

Nick Britton

Communications Manager - Defence Aerospace

Rolls-Royce plc

Tel: [phone]

Email: [e-mail]