Preliminary Results 2000

Rolls-Royce PLC
2 March 2001


ROLLS-ROYCE plc PRELIMINARY RESULTS 2000

Rolls-Royce plc announced today preliminary results for the year ended 31
December 2000.  Highlights are:


                                    2000        1999
Sales                              £5864m      £4634m      +27%
*Underlying profit before tax      £436m       £368m       +18%
Underlying earnings per share      21.63p      19.52p      +10.8%
Dividend                           8.00p       7.25p       +10.3%
Order book                         £13.1bn     £11.5bn     +14%


*See note 2


Sir Ralph Robins, Chairman, said:-

'We achieved our financial targets in 2000 including the predicted reduction
in average borrowings.

'In 2000, the management team met the challenge of successfully integrating
the Vickers acquisition and creating a world leader in marine propulsion
systems.  We continue to strengthen our position in civil aerospace,
participate in many of the world's key defence aerospace programmes and expect
to grow our position in the Energy sector as we introduce new products.

'In each of our market sectors we are able to exploit our core technologies by
developing a range of related products and value added services.  We enter
2001 with a record order book of more than £13 billion.

'Significant opportunities exist to provide support to our customers
throughout the life of the product in service.  As a result service revenues
grew by 20 per cent during 2000.'   



Business overview

Rolls-Royce continued to develop its strong portfolio of businesses in 2000,
increasing its focus, strengthening its market position and improving its
productivity. 

The company met its financial targets and achieved a record order book. 
Average net debt levels, before the impact of acquisitions, were reduced, as
the company predicted.

Rolls-Royce has anticipated customer needs in civil aerospace, defence, marine
and energy markets and has successfully invested in new products and services
to meet this demand. The capabilities and technologies developed to satisfy
the needs of customers, particularly in the aerospace sector, are increasingly
being applied in each of the company's markets.  

The company has been an innovator in many areas of its business: - 

* Rolls-Royce developed the Trent family of engines, anticipating the market
need for a range of engines to power the new generation of wide-bodied
aircraft.  This has enabled the company to stay ahead of the competition,
securing almost 50 per cent of the global market opportunity. 
* Rolls-Royce and Partners Finance, established in 1989, anticipated the
growth of aircraft and engine leasing.  The company has become the world's
largest specialist aero engine leasing business.
* The acquisition in 1995 of the Allison Engine Company anticipated the strong
growth in the corporate and regional aircraft sector, where the company is now
a global leader.  It also enabled the company to consolidate its position on
the US Joint Strike Fighter programme, the world's largest defence aerospace
programme.
* The company has become a world leader in marine propulsion systems following
the acquisition of Vickers in 1999.  Rolls-Royce is well placed to benefit
from the move towards integrated propulsion systems and the growing emphasis
on gas turbines in the commercial sector.
* Across all its markets Rolls-Royce has developed a strong services
capability. Financial and aftermarket services account for 38 per cent of the
company's sales.  They offer a strong growth opportunity as the company
extends the scope of its services for customers.  By making early investments
in its repair and overhaul network, the company has been able to double its
share of the overhaul of Rolls-Royce civil aero engines. 
* The company has invested in its predictive maintenance capability through
Data Systems and Solutions (DS&S), a joint venture with the US-based Science
Applications International Corporation.  DS&S is pioneering internet-based
customer services, which are applicable in each of Rolls-Royce's markets. 


Prospects

The near-term outlook is consistent with the view given at the announcement of
its half year results in August 2000.  Earnings growth is expected to resume
in 2002. 

Rolls-Royce is well positioned for growth in each of its markets.  These
markets present opportunities for the company to exploit its world-leading gas
turbine technology supported by a range of related products and services. In
2000, the company increased its focus on these activities with the sale of
non-core  businesses, such as Materials Handling, Cochran Boilers and the
major part of Vickers Turbine Components.

The company strengthened its market position by introducing new products and
winning new customers.  The Trent 500 was certificated, ahead of schedule; the
WR-21 marine engine was launched with the Royal Navy; the first EJ200
production engine for Eurofighter was assembled and tested; and, in the oil
and gas sector, Rolls-Royce was chosen as a preferred supplier by BP Amoco.

Good progress was made with the implementation of the new combustion system
for the industrial Trent.  The company expects to complete this exercise
within the £120 million provision established.  Demand for the industrial
Trent is strong and the company anticipates annual sales will reach 30 units
within five years. 

Rolls-Royce has continued to increase efficiency.  Sales per employee
increased by 11 per cent in 2000.  In addition to ongoing restructuring, the
company announced further plans for the rationalisation of its business
following a period of rapid growth and increased complexity arising from
acquisitions and joint ventures.  

Simplification of the business structure will reduce costs and deliver
substantial efficiency gains.  The cost of this programme will amount to £150
million, spread over three years, as previously announced.  It is now likely
that about half of this will be incurred before the end of 2001.  

The company's proposals include concentrating the large gas turbine operations
of its Energy business in Montreal and the consolidation of its Naval Marine
surface vessels business in Bristol.  The company is also assessing its
engineering capabilities with a view to using this resource more efficiently
and effectively by co-locating it wherever possible with the relevant
Rolls-Royce business.  

The company constantly reviews its supply chain to ensure that world-class
standards are achieved in design and manufacture of components, whether
outsourced or made by Rolls-Royce.  The rationalisation programme includes a
detailed assessment of the future balance between in-house centres of
excellence and external sourcing. 

In 2001, as previously indicated, underlying earnings are expected to be
unchanged.  This is due to a combination of factors, including the mix of
business in civil aerospace, delayed sales of the industrial Trent and
continuing restructuring costs. Earnings growth is expected to resume in 2002.
 
The company has a well balanced portfolio of businesses which are all expected
to contribute to future growth.  The strongest growth is expected to occur in,
energy, marine, financial services and defence.  More modest growth is
expected from civil aerospace, where the company is investing in the Trent 600
and 900 engines.  The current civil product portfolio is relatively new and is
expected to generate significant long term returns.

As a result of improving returns and asset efficiency, the company expects to
continue to reduce the average level of net debt, on a comparable basis.     



Enquiries

Peter Barnes-Wallis 
Director of Financial Communications

Tim Blythe 
Director of Corporate Communications

Tel: [phone]

www.rolls-royce.com


Rolls-Royce plc preliminary results 2000

Underlying profit before tax was £436 million, up 18 per cent over 1999. 
Underlying earnings per share grew by 10.8 per cent to 21.63p. 

An exceptional provision of £120 million was made, to cover the costs
associated with implementing new combustion technology on the industrial
Trent.  £55 million of this was utilised during the year.  The balance is
expected to be utilised in 2001.

The firm order book was £13.1 billion (1999 £11.5 billion).  In addition, a
further £1.4 billion had been announced but not yet included in the order book
(1999 £1.7 billion).  Total care packages for aftermarket services represented
almost ten per cent of the order book.  These are long term contracts where
only the first seven years revenue is included in the order book.

Sales, including the impact of the acquisitions made in 1999, increased by 27
per cent to £5,864 million (1999 £4,634 million). Civil spares sales grew by
15 per cent, of which ten percentage points related to sales of RB211 upgrade
kits.

Underlying trading profit, before restructuring costs and after the net impact
of risk and revenue sharing partners, increased by 17 per cent, to £901
million (1999 £773 million).  Underlying trading margin reduced by 1.3
percentage points, as a result of an increased loss in the energy business and
the lower defence profits.

Gross research and development investment was £604 million (1999 £626
million).  Net research and development expenditure, before receipts from risk
and revenue sharing partners, increased to £371 million (1999 £337 million),
as a result of the impact of acquisitions and development of the Trent 500. 
Net research and development figures have been restated to reflect the change
of accounting presentation announced on 28 February 2001. 

Risk and revenue sharing partners (RRSPs) contributed £341 million, now shown
under other operating income (1999 £232 million). Payments to RRSPs, charged
in cost of sales, amounted to £129 million (1999 £99 million).  Following the
launch of the Trent 600 and 900, RRSP receipts are expected to be relatively
stable in 2001. Payments to RRSPs will grow in line with sales of the relevant
engine programme.  Future receipts will depend upon existing RRSP
arrangements, the launch of new programmes and the ability to attract new
partners.

The taxation charge, at £83 million, represents a rate of 22.8 per cent of
underlying profits and reflects the write back of Advance Corporation Tax
written off in previous years.

Capital expenditure was £186 million (1999 £250 million), including £35
million in respect of acquired businesses. In addition, investment in finance
companies was £67 million (1999 £162 million).

The fair value adjustments relating to newly acquired businesses, which were
reported provisionally in the 1999 accounts, have been finalised.  This has
resulted in an overall increase to fair value adjustments of £33 million, with
a corresponding increase in goodwill.

Average net debt, before the impact of acquisitions, was in line with the
company's plans and, at £335 million, showed a 14 per cent reduction over 1999
(1999 £390 million).  Average net debt, after acquisitions, was £1,323
million.  The company expects to continue to reduce average net debt as a
result of trading cash flows, control of working capital, cost reduction and
disposals of non-core activities.  Net debt on 31 December 2000 was £690
million. 
  
Cash flow returns on invested capital are expected to grow, reflecting more
effective management of margins and enhanced utilisation of assets.  Margins
will benefit from the company's broader business portfolio, cost reduction and
lower interest charges. Asset efficiency will be increased substantially by
the company's new Enterprise Resource Planning system, the outcome of the
company's rationalisation proposals and the results of the make:buy review.

The proposed final dividend is 5.00 pence per share, an increase of 10 per
cent over 1999, making a full year dividend of 8.00 pence per share (1999
7.25p).  The dividend is payable on 2 July 2001 to shareholders on the
register on 27 April 2001.  The ex-dividend date is 25 April 2001.


REVIEW OF OPERATIONS 

Civil aerospace:  Sales £3,150m; underlying profit before interest £332m

The company's civil aerospace business will become more robust and predictable
as it grows and matures, reaping the benefits of a greater installed base of
engines.  

Civil engine programmes typically reach the break-even point 10 to 15 years
after the programme is launched and an engine programme may be in service for
more than 50 years.  Over each programme the financial rewards are substantial
and are weighted towards the aftermarket for spare parts and services.  The
return on sales depends, therefore, on the size and maturity of the installed
base of engines, which creates the aftermarket opportunity.  The company has
taken steps to secure a high proportion of this opportunity through the supply
of spare parts and the development of aftermarket services.  In particular,
total care packages have been put in place, which offer a comprehensive
service to customers throughout the life of the engine.

In 2001, profits will be lower as a result of the high proportion of civil
engine deliveries, combined with lower spares sales. Subsequent growth will
reflect continuing market success and the increasing maturity of the product
portfolio.

Rolls-Royce expects its installed base of engines to almost double over the
next five years, as a result of market share gains and the consequent growth
in engine deliveries.  A growing proportion of the company's civil aerospace
profits will, therefore, arise from the aftermarket.

2000 was a strong year for the civil aerospace industry, with record new
aircraft orders placed.  Rolls-Royce increased its market share and achieved
record engine deliveries. 

Rolls-Royce secured a 31 per cent share of engine orders placed during the
year and a 27 per cent share of engines delivered. 1,091 engines were
delivered, a number which is expected to increase in 2001 and 2002 to more
than 1,300 engines per annum.  This compares to an annual average of 400
engines in the first half of the 1990s and 200 engines in the late 1980s. 

The increase in engine deliveries reflects the company's success in building a
strong portfolio of aero engines, which it has achieved through investment in
new products, acquisitions and joint ventures.  

In the airline sector, success was achieved across the product range, from
regional airliners to large wide-bodied aircraft.

The Trent 700 and 800, in service on the Airbus Industrie A330 and Boeing 777
respectively, secured new orders from customers in Europe, North America,
South East Asia and the Middle East.  

The Trent 500, under development for the A340-500 and 600 aircraft, gained
certification ahead of schedule.  Ten customers have placed firm and option
engine orders with a total value of $5.8 billion.  

The Trent 900 won launch customers on the new Airbus Industrie A380 aircraft. 
Singapore Airlines and Virgin Atlantic ordered up to 37 Trent-powered A380s,
worth more than $2 billion.  Since the year end the company has been selected
by Qantas to power its 12 A380 aircraft.

The RB211-535, powering the Boeing 757, won new orders from American Trans
Air, Continental Airlines and American Airlines.  Deliveries of the 535 engine
are expected to grow over the next two years.

Demand in the regional airline sector remains strong.  Orders for Rolls-Royce
AE3007 powered Embraer regional jets now exceed 1,200 aircraft.  AE3007 engine
deliveries exceeded 400 in 2000 and are expected to grow to approximately 500
in 2001. 

Growth in the corporate jet sector has been stimulated by the introduction of
new aircraft and fractional ownership. Rolls-Royce has a sole-source engine
position on a range of corporate aircraft, including the Bombardier Global
Express, the Cessna Citation X and the Gulfstream IV and V. Gulfstream
announced a new generation of the GIV which will be powered by the Rolls-Royce
Tay engine. Embraer launched a corporate version of the Rolls-Royce powered
ERJ 145. 

The company made good progress with the integration of Rolls-Royce Deutschland
which had previously been a joint venture with BMW.  In 2000, Rolls-Royce
Deutschland delivered almost 200 engines for corporate and regional aircraft. 

Defence: Sales £1,403m, underlying profit before interest £154m

Rolls-Royce is a transatlantic defence company with a strong, mature product
range and participation in many of the world's new defence programmes.   

In 2000, profits were affected by the phasing of long-term contracts,
particularly the EJ200 engine for Eurofighter.  Profits are expected to grow
in 2001 and beyond. 

The EJ200 engine is making the transition from development to production.  The
first production engine was assembled and tested in December. Output is
expected to increase to around 100 engines a year by 2003.  Rolls-Royce has a
36 per cent share of the engine production contract, which covers up to 1,500
engines for 620 aircraft.  The company also owns 47 per cent of ITP, the
Spanish engine company which also participates in this programme.

The first Pegasus Mk 107 engines were delivered to the Royal Air Force to
power its Harrier GR 7 aircraft fleet, under an agreement to upgrade up to 126
engines, worth  £350 million.  The upgrade, one of the first examples of Smart
Acquisition, provides more than 10 per cent additional thrust over the current
engines.

Rolls-Royce expanded its defence portfolio through its participation in a new
European consortium which will develop the TP400 engine for the A400M European
transport aircraft. The company will be responsible for the low pressure
compressor and the overall integration of the engine.  ITP will be responsible
for the engine casings and dressings.
  
Participation in the TP400 consolidates the company's position as a world
leader in the transport sector, where it also supplies engines for the C-130J
and V-22 aircraft. 

The United States Department of Defense (DoD) is the company's largest defence
customer.  Rolls-Royce supplies the DoD with a range of engines for many
sectors, including combat, trainer, transport, maritime patrol, aerial
surveillance and helicopters.  The US Joint Strike Fighter programme is one of
the world's largest defence procurement programmes.  Rolls-Royce is
participating in each of the competing aircraft configurations, the prototypes
of which made their first flights in 2000.  The UK Government recently
confirmed its participation in the engineering, manufacturing and development
stage of the programme.    

Rolls-Royce forecasts demand for nearly 10,000 gas turbine powered helicopters
over the next ten years.  55 per cent of the demand is expected to arise in
the civil market and 45 per cent in defence. 

The RTM 322 completed 3,000 hours operation in the GKN Westland Apache.  The
British Army has ordered 67 Apache helicopters with entry into service
scheduled for the end of this year.

Germany, France and the Netherlands selected Rolls-Royce Turbomeca RTM 322
engines, with a potential value of one billion dollars, for up to 399
twin-engined NH90 helicopters.

An order for 320 MTR390 engines for the Franco-German Tiger helicopter was
signed in 2000.  Deliveries begin this year and run through to 2011.

Customer support offers a growing opportunity for Rolls-Royce in the defence
sector.  Customers are focusing upon their core activities, creating an
opportunity for Rolls-Royce to provide a range of services from long term
support to complete managed fleet solutions.  The company offers its customers
modern logistic planning and management processes designed to improve
operational effectiveness and reduce life cycle support costs.  In 2000,
further integrated logistic support services for the EJ200 engine were
announced.   

Vickers Defence Systems won a £70 million contract, to supply spare parts and
logistics services to the Ministry of Defence in support of the British Army's
Challenger 2 main battle tank. Vickers Specialist Engines was selected as
preferred bidder to the Field Electrical Power Supply (FEPS) programme to
provide mobile generators for the British Army.  The programme is estimated to
have a total value of more than £100 million over the next 15-20 years. 

Marine: Sales £751m, underlying profit before interest £67m

Rolls-Royce has developed a world leading marine business, serving customers
in commercial and naval markets.  The acquisition of Vickers in 1999 added a
range of complementary products and services and expanded the company's routes
to market.  

The integration of Vickers has proceeded well, with the company achieving its
acquisition objectives.

Rolls-Royce expects its marine business to grow substantially over the next
five years. This growth is driven by three main factors:

* A naval re-equipment cycle is commencing, as new vessels are introduced 
incorporating advanced technologies and offering lower through life costs. 
The WR-21 marine gas turbine, developed in partnership with Northrop Grumman,
represents the next generation of fuel-efficient engines.  It achieved a
significant breakthrough when it secured a launch order for the first three
ships of a new fleet of air defence destroyers for the Royal Navy.  A class of
up to 12 Type 45 destroyers is planned.

* The company is benefiting from a strong recovery in the commercial offshore
service vessel sector.  In the past year, Rolls-Royce designs and packages of
equipment have been selected for 53 offshore service vessels, representing a
record order intake in this sector.  The total value of these contracts, which
include packages of Rolls-Royce propulsion equipment, is £170 million. 

* The company will benefit from its enhanced market position, as it addresses
the whole of the marine market with its comprehensive product range and
systems integration capability.  In particular the company will be able to
exploit developments in the commercial sector, where it has world-leading
positions with its broad range of propulsion components.  This, combined with
an in-depth knowledge and gas turbine technology, allows the marine business
to offer competitive proposals for the new generation of cruise and cargo
vessels.  Rolls-Royce has been selected to power the first of a new generation
of fast cargo vessels, FastShip, with the 50MW marine Trent and Kamewa water
jets. 

The marine business offers an excellent opportunity to exploit the gas turbine
technology originally developed for aerospace applications.  Computational
fluid dynamics tools, developed for aerospace, are being applied to marine
propulsor design.  Aerospace materials, manufacturing engineering and advanced
measurement techniques are helping to reduce costs and improve the performance
of the company's marine products. The core gas turbine technology is being
applied to a broad range of marine gas turbines, to 50MW.  The company plans
to introduce new aero-derivatives to match the needs of the marine market.   


Energy: Sales £476m, underlying loss before interest £48m
 
Rolls-Royce plans to generate significant growth in its energy business, with
the launch of new products. The addressable market is forecast to be worth
$165 billion over the next ten years and the company is making significant
investments with the objective of securing an increasing proportion of the
growing global energy market. About three quarters of this opportunity lies in
power generation and one quarter in the oil and gas sector.

In each of these sectors the company is pursuing the strategy of developing a
strong market position through the exploitation of its core gas turbine
technology. 

In the power generation sector, the deregulation and privatisation of the
electricity supply industries, environmental pressures, infrastructure
constraints and the growing availability of gas are all creating higher levels
of demand which Rolls-Royce is addressing through its range of gas turbine and
diesel equipment. 

The financial performance of the energy business reflects the high level of
investment in the industrial Trent and the start-up nature of this business.

The company has made good progress with the implementation of the new
combustion system for the industrial Trent.  It is on target to demonstrate
this system in a production environment in the second quarter of this year. 
Demand for the product is strong and the company expects annual sales to reach
30 units within five years. 

Sales in the oil and gas sector fell in 2000, as levels of investment in the
oil and gas exploration industry remained subdued.   Order intake improved in
the first quarter of 2001, supported by the sustained recovery in oil prices,
with more orders being secured in this period than in the whole of 2000.  
This will benefit the company's sales in 2001 and beyond.

The company successfully integrated the compressor and packaging business of
Cooper Cameron, acquired in 1999.  This has enabled it to offer integrated
solutions and improved support to customers through aftermarket services.  The
aftermarket offers significant growth prospects for the energy business as it
exploits the capabilities developed in other parts of the company, such as
predictive maintenance techniques and total care packages.

Financial Services: Sales £40m, underlying profit before interest £56m

The financial services businesses comprise subsidiary and joint venture
companies. These offer engine leasing, aircraft leasing and management, and
power project development services in support of the company's core business
activities.   

Rolls-Royce has invested £370 million over the past five years in its
financial services.  These businesses are making an increasing contribution to
profits as they grow and mature.  They have been developed through
partnerships which share investment and risk and which bring expertise and
objectivity.

The gross assets of the financial services businesses, including partner
shares, amount to £1.7 billion.  Net assets amount to £112 million, reflecting
the financial structure of the joint ventures, with a large proportion of the
gross assets funded by non-recourse debt. Gross sales amounted to £190
million.

Rolls-Royce Power Ventures, the company's energy services subsidiary, ended
the year with 12 power generation projects in operation and four projects in
late stage commissioning.  Through these projects, RRPV sells electricity to
utilities and industrial clients in nine countries on four continents. 
Rolls-Royce power generation equipment is used extensively in these projects. 
The potential for RRPV's business grows as more countries privatise their
power generation industries and more industrial customers subcontract their
energy services. 

Pembroke Group, the company's aircraft leasing joint venture, continued to
grow. It has a portfolio of 145 aircraft owned, managed or on order or option.
 GATX, the US-based finance and leasing company, recently became an equal
partner with Rolls-Royce in this joint venture, endorsing the approach that
Rolls-Royce has taken in the development of this business. 


Rolls-Royce and Partners Finance, the world's largest specialist aero gas
turbine leasing business, is also a 50:50 partnership with GATX.  The company
had a successful year and made an increased profit contribution.  By the end
of the year, it had 190 engines, representing 13 engine types, in its lease
portfolio. 

Aftermarket services: Sales and profit figures are included in the relevant
market sectors.

Rolls-Royce has continued the strategic development of its aftermarket
activities.  The entry into service of a Rolls-Royce engine marks the start of
a customer relationship which may last 25 years or more.  This creates a
significant opportunity through the provision of spare parts and associated
services.  In the civil aerospace sector, the supply of spare parts over the
life of an engine generates revenue equivalent to the original list price of
the engine.  The company's expanded range of aftermarket services will
generate further revenue. 

Over the past five years the company has invested £200 million in the
expansion of its aerospace repair and overhaul network, including joint
ventures and acquisitions.  This has enabled the company to more than double
its share of the repair and overhaul of Rolls-Royce aero engines.  Sales,
including all those of the joint ventures, have more than trebled, with the
number of worldwide locations increasing from six to 17.

The company has continued to develop total care packages.  These offer a
comprehensive aftermarket service to customers, covering the operation and
maintenance of the engine throughout its life.  Whilst pioneered in the civil
aerospace business, the concept of total care is increasingly being applied in
the company's other business sectors.  In January 2001, the company announced
a maintenance support agreement with American Airlines, worth one billion
dollars over ten years, for its fleet of RB211-535 engines.

Data Systems and Solutions (DS&S) completed its first full year of operation. 
The company provides predictive services, including engine health monitoring
and engine shop visit forecasting.  These services are applied to total care
packages and are yielding potential savings ten times greater than their cost.
 DS&S launched aeromanager.com in 2000, providing new predictive services
which add value to the customer's operation.  aeromanager.com combines
information from a wide variety of sources within Rolls-Royce with data
collected from engines in service.  

Operational improvement

Rolls-Royce is concentrating its improvement activities on a number of
well-defined areas, with a strong emphasis on reducing lead times. The company
aims to achieve a  step change in performance by shortening the time from
order receipt to delivery of an engine, and by continuing to invest in lean
manufacturing techniques.  The improvement activities also have a strong focus
on the reduction of costs in all areas of operation with aggressive targets
set, backed by appropriate implementation plans.

Underpinning all the improvement activities is an ongoing investment in the
company's use of information. This is being approached through a balanced
strategy of new e-business developments combined with major replacement of
back-office systems.  The aims of the e-business programmes are to provide
enhanced services to customers, whilst at the same time making significant
reductions in transaction costs with suppliers and partners.  Major roll-out
programmes for back-office systems have continued and include the new
Enterprise Resource Planning system, as well as new systems for the management
of product definition data and in-service product performance data.


Group profit and loss account
for the year ended December 31, 2000



                                   Continuing   Exceptional Total   Restated 
                                   operations    items**    2000    Total 1999
                                     before
                               exceptional items
                                     £m           £m         £m       £m
                            Notes

_____________________________________________________________________________
Turnover: Group and share
  of joint ventures                 5,955          -        5,955      4,697
Sales to joint ventures               893          -          893        799
Less share of joint ventures'  
  turnover                           (984)         -         (984)      (862)

_____________________________________________________________________________
Group turnover             1        5,864          -        5,864      4,634
Cost of sales                      (4,860)      (145)      (5,005)    (3,787)
_____________________________________________________________________________
Gross profit                         1,004      (145)         859        847
Other operating income                341          -          341        232
Commercial, marketing and 
product support costs                (268)         -         (268)      (195)
General and administrative costs     (271)         -         (271)      (171)
Research and development (net)*      (371)         -         (371)      (337)
_____________________________________________________________________________
Group operating profit                435       (145)         290        376
Share of operating profit of 
  joint ventures                       76          -           76         31
Loss on sale or termination of 
  businesses                           (5)       (73)         (78)       (14)
Profit on sale of fixed assets          1          -            1         20
_____________________________________________________________________________
Profit on ordinary activities 
  before Interest                1    507       (218)         289        413
Net interest payable -  Group         (85)         -          (85)       (35)
                     - joint ventures (38)         -          (38)       (18)

_____________________________________________________________________________
Profit on ordinary activities 
  before taxation                     384       (218)         166        360
Taxation                              (99)        16          (83)       (74)

_____________________________________________________________________________
Profit on ordinary activities 
  after taxation                      285       (202)          83        286
                                     ------------------
Equity minority interests in 
   subsidiary undertakings                                      -         (2)

_____________________________________________________________________________
Profit attributable to ordinary shareholders                   83        284
Dividends                                                    (126)      (112)
_____________________________________________________________________________
Transferred (from)/to reserves                                (43)       172
_____________________________________________________________________________
*Research and development (gross)                            (604)      (626)

Earnings per ordinary share:   2
Underlying                                                  21.63p     19.52p
Basic                                                        5.33p     18.86p
Diluted basic                                                5.30p     18.62p

**exceptional items are: industrial Trent provision        £(120)m
                         acquisition restructuring          £(16)m
                         rationalisation                     £(9)m
                         disposal of Materials Handling     £(73)m
                                                          ----------
                                                           £(218)m
                                                                    ----------

Group Balance sheet
at December 31, 2000
                                                                   restated
                                                  2000               1999
                                                   £m                 £m
_____________________________________________________________________________
Fixed assets
Intangible assets                                 889                918
Tangible assets                                 1,772              1,753
Investments - subsidiary undertakings               -                  -
            - joint ventures                      174                151
                                              ______________________________ 
                 share of gross assets          1,117                958   
                 share of gross liabilities      (943)              (807)
                                              ______________________________
            - other                                33                 31
_____________________________________________________________________________
                                                2,868              2,853
_____________________________________________________________________________

Current assets

Stocks                                          1,166              1,274
Debtors  - amounts falling due within one year  1,591              1,292
         - amounts falling due after one year     482                355
Short-term deposits and investments               142                464
Cash at bank and in hand                          498                521
_____________________________________________________________________________
                                                3,892              3,906

Creditors - amounts falling due within one year
Borrowings                                       (272)              (408)
Other creditors                                (2,559)            (2,467)
_____________________________________________________________________________
Net current assets                              1,061              1,031
_____________________________________________________________________________

Total assets less current liabilities           3,929              3,884

Creditors - amounts falling due after one year
Borrowings                                     (1,058)            (1,271)
Other creditors                                  (206)              (109)

Provisions for liabilities and charges           (601)              (503)
_____________________________________________________________________________

                                                2,064              2,001
_____________________________________________________________________________

Capital and reserves

Called up share capital                           314                309
Share premium account                             623                615
Revaluation reserve                               108                112
Other reserves                                    182                140
Profit and loss account                           836                812

_____________________________________________________________________________
Equity shareholders' funds                      2,063              1,988

Equity minority interests in subsidiary 
  undertakings                                      1                 13
_____________________________________________________________________________
                                                2,064              2,001
_____________________________________________________________________________






Group cash flow statement 
for the year ended December 31, 2000

                                                                    restated
                                                 Notes      2000      1999
                                                             £m        £m
_____________________________________________________________________________
Net cash inflow from operating activities          A        479        359
Dividends received from joint ventures                       13          6
Returns on investments and servicing of finance    B        (76)       (32)
Taxation paid                                               (25)       (38)
Capital expenditure and financial investment       C       (253)      (199)
Acquisitions and disposals                         D        (53)      (666)
Equity dividends paid                                       (74)       (88)
_____________________________________________________________________________

Cash inflow/(outflow) before use of liquid 
resources and financing                                      11       (658)
Management of liquid resources                     E        324        261
Financing                                          F       (360)       622

_____________________________________________________________________________
(Decrease)/increase in cash                                 (25)       225
_____________________________________________________________________________

Reconciliation of net cash flow to movement in net funds

(Decrease)/increase in cash                                 (25)       225
Cash (inflow) from (decrease) in liquid resources          (324)      (261)
Cash outflow/(inflow) from 
    decrease/(increase) in borrowings                       370       (618)

Change in net funds resulting from cash flows                21       (654)
Borrowings of businesses acquired                             -       (332)
Amortisation of zero-coupon bonds                            (3)        (3)
Exchange adjustments                                        (14)        (7)
_____________________________________________________________________________


Movement in net funds                                         4       (996)
Net (debt)/funds at January 1                              (694)       302
_____________________________________________________________________________

Net debt at December 31                                    (690)      (694)

_____________________________________________________________________________



Reconciliation of operating profit to operating cash flows      2000     1999
                                                                 £m       £m

Operating profit                                                290       376
Amortisation of intangible assets                                60        19
Depreciation of tangible fixed assets                           178       105
(Profit)/loss on disposals of tangible fixed assets              (3)        4
Increase/(decrease) in provisions for liabilities 
  and charges                                                    49       (34)
Decrease in stocks                                               62        39
Increase in debtors                                            (374)     (127)
Increase/(decrease) in creditors                                217       (23)
_____________________________________________________________________________
A     Net cash inflow from operating activities                 479       359
_____________________________________________________________________________

Returns on investments and servicing of finance       

Interest received                                                26        26
Interest paid                                                   (96)      (51)
Interest element of finance lease payments                       (6)       (7)
_____________________________________________________________________________

B  Net cash outflow for returns on investments 
         and servicing of finance                               (76)      (32)
_____________________________________________________________________________

Capital expenditure and financial investment


Additions to unlisted investments                                (2)        -
Addition to certification costs                                 (10)        -
Purchases of tangible fixed assets                             (292)     (381)
Disposals of tangible fixed assets                               51       187
Acquisitions of own shares by trust                               -        (5)

_____________________________________________________________________________
C    Net cash outflow for capital expenditure 
       and financial investment                                (253)     (199)
_____________________________________________________________________________

Acquisitions and disposals

Acquisitions of businesses                                      (45)     (653)
Disposals of businesses                                          (5)       14
Investments in joint ventures                                   (13)      (27)
Loan repayments from joint ventures                              10         -
_____________________________________________________________________________
D    Net cash outflow for acquisitions and disposals            (53)     (666)
_____________________________________________________________________________
Management of liquid resources

Decrease in short-term deposits                                 327       262
Increase in government securities and corporate bonds            (3)       (1)

_____________________________________________________________________________

E  Net cash inflow/(outflow) from management of 
      liquid resources                                          324       261
_____________________________________________________________________________

Financing

Borrowings due within one year   - repayment of loans          (147)        -
                                 - increase in loans              -        88
Borrowings due after one year    - repayment of loans          (725)     (196)
                                 - new loans                    510       734
Capital element of finance lease payments                        (8)       (8)


Net cash (outflow)/inflow from 
  (decrease)/increase in borrowings                            (370)      618
Issue of ordinary shares                                         10         4

_____________________________________________________________________________
F  Net cash (outflow)/inflow from financing                    (360)      622
_____________________________________________________________________________





Group statement of total recognised gains and losses
for the year ended December 31, 2000

                                                                2000    1999
                                                                 £m      £m
_____________________________________________________________________________
Profit attributable to the shareholders of Rolls-Royce plc       83      284
Exchange adjustments on foreign currency net investments         30       17
                                                            __________________
Total recognised gains for the year                             113      301
                                                            __________________


Group historical cost profits and losses
for the year ended December 31, 2000
_____________________________________________________________________________
                                                                2000    1999
                                                                 £m      £m
_____________________________________________________________________________
Profit on ordinary activities before taxation                   166      360
Difference between the historical cost 
  depreciation charge and the actual depreciation 
  charge for the year calculated on the revalued amount           4        2


Historical cost profit on ordinary activities               __________________
  before taxation                                               170      362
                                                            __________________


Historical cost transfer to reserves                            (39)     174



Reconciliations of movements in Group shareholders' funds
for the year ended December 31, 2000


                                                                2000    1999
                                                                 £m      £m
_____________________________________________________________________________
At January 1                                                  1,988    1,705
Total recognised gains for the year                             113      301
Ordinary dividends (net of scrip dividend adjustments)          (89)    (101)
New ordinary share capital issued (net of expenses)              10       75
Goodwill transferred to the profit and loss 
   account in respect of disposal of businesses                  41        8

_____________________________________________________________________________
At December 31                                                2,063    1,988
_____________________________________________________________________________



Notes

1.       Segmental Analysis


                                                                   restated
                                                      2000           1999
                                                       £m             £m
_____________________________________________________________________________
Group turnover

Analysis by businesses:
      Civil aerospace                                3,150           2,544
      Defence                                        1,403           1,138
      Marine Systems                                   751             385
      Energy                                           476             482
      Financial Services                                40              37
      Materials Handling                                44              48
_____________________________________________________________________________
                                                     5,864           4,634
_____________________________________________________________________________

Profit before interest
_____________________________________________________________________________
Analysis by businesses:
      Civil aerospace                                  312             232
      Defence                                          151             181
      Marine Systems                                    38              37
      Energy                                          (191)            (39)
      Financial Services                                55              24
      Materials Handling                               (76)            (22)
_____________________________________________________________________________
                                                       289             413
_____________________________________________________________________________

Underlying profit before interest**


Analysis by businesses:
      Civil aerospace                                  332            224
      Defence                                          154            182
      Marine Systems                                    67             43
      Energy                                           (48)           (30)
      Financial Services                                56             24
      Materials Handling                                (2)           (22)
_____________________________________________________________________________
                                                       559            421

**before exceptional and non trading items
_____________________________________________________________________________


Net assets*

Analysis by businesses:

      Civil aerospace                                1,152         1,074
      Defence                                          286           312
      Marine Systems                                   600           595
      Energy                                           444           468
      Financial Services                               295           243
      Materials Handling                               (23)            3
_____________________________________________________________________________
                                                     2,754         2,695

*Net assets exclude net debt of £690m (1999 £694m)
_____________________________________________________________________________

The segmental analysis of exceptional items is: Civil aerospace £9m, Marine
systems £3m, Energy £133m, and Materials Handling £73m.



2.       Earnings per ordinary share

Basic earnings per ordinary share are calculated by dividing the profit
attributable to ordinary shareholders of £83 million (1999 £284m) by 1,558
million (1999 1,506 million) ordinary shares, being the average number of
ordinary shares in issue during the year, excluding own shares held under
trust which have been treated as if they have been cancelled.

Underlying profit before taxation and earnings per ordinary share for 2000
have been calculated as follows: 



                                                         £m       £m    Pence
_____________________________________________________________________________
Profit before Taxation                                  166
Profit attributable to ordinary shareholders                      83     5.33
Exclude: 
    Net loss on sale of businesses - Materials handling  73       73     4.69
                                   - Other                5        5     0.32
Loss on sale of fixed assets*                             1        1     0.06
Amortisation of goodwill                                 46       46     2.95
Restructuring of acquired business                       16       16     1.03
Exceptional rationalisation                               9        9     0.58
Energy - exceptional charge                             120      120     7.70
Related tax effect                                        -      (16)   (1.03)

_____________________________________________________________________________
Underlying profit before taxation                       436
_____________________________________________________________________________
Underlying profit attributable to shareholders                   337
_____________________________________________________________________________
Underlying earnings per share                                           21.63
_____________________________________________________________________________



* excluding lease engines and aircraft sold by financial services companies.

Diluted basic earnings per ordinary share are calculated by dividing the
profit attributable to ordinary shareholders of £83m  (1999 £284m) by 1,566
million (1999 1,525 million) ordinary shares, being 1,558 million (1999 1,506
million) as above adjusted by the bonus element of existing share options of 8
million (1999 19 million).



3. Group Employees at the period end


                                         31 December      31 December
                                           2000              1999
                                          Number            Number

Civil Aerospace                          24,500            25,700
Defence                                   7,300             7,900
Marine Systems                            6,500             6,600
Energy                                    5,300             5,600
Financial Services                          100               100
Businesses disposed                           -             3,700
                                      _________________________________
                                         43,700            49,600
 
4. The financial information above does not constitute the Group's statutory
accounts for the year ended December 31, 2000 or 1999.  Statutory accounts for
1999 have been delivered to the Registrar of Companies, whereas those for 2000
will be delivered following the annual general meeting.   The auditors have
reported on those accounts; their reports were unqualified and did not contain
a statement under section 237(2) or (3) of the Companies Act 1985.