Chairman's Statement

Rolls-Royce PLC
25 May 2000



2000 ANNUAL GENERAL MEETING
CHAIRMAN'S STATEMENT

1999 was a notably successful year for Rolls-Royce.  We made significant
progress with our consistent strategy of increasing our share of the growing
markets for power; on land, at sea and in the air.  This progress was
delivered from our existing operations through a combination of winning new
business and greater efficiency, and from acquisitions, of which Vickers and
the outstanding interest in the BMW Rolls-Royce joint venture, were the most
substantial.

In each of our key markets we offer customers total solutions based largely on
our core gas turbine technology, from the original equipment we manufacture
through to systems integration and aftermarket services.  I am pleased to
report that increasing recognition of the inherent embedded value we are
creating, has enabled us to attract additional risk and revenue participation
in some of our major programmes, for the benefit of shareholders.

I believe we have delivered an impressive set of operating statistics over the
second half of the last decade.  In the past five years, we have tripled gas
turbine deliveries, more than doubled our installed engine base, grown top
line sales by 13% per annum, tripled our aero aftermarket business, increased
sales per employee by 70%, while consistently returning double digit earnings
growth in every one of the five years.  We are proud of this record at a time
when many other UK manufacturing companies have been struggling.

Our heavy investment programmes over this period provides the platform for
further progress in the new millennium.  Over the five years, we have invested
nearly five billion pounds in gross research and development and one and a
half billion pounds in capital investment.    Without this, we would not have
achieved the current market position.  Last year alone, we invested over £400
million in capital, £600 million in research & development and a billion
pounds in new acquisitions to extend the scope and reach of the Rolls-Royce
business.

Let me touch briefly on each of the five sectors by which we will be reporting
our future progress, and share with you some of the key highlights of last
year.

First, civil aerospace, where we delivered over 1000 engines compared with
less than 400 ten years ago. These engines now power more than 30 airframe
types.  

The Trent continues to be the engine of choice for the Boeing 777 and the
Airbus Industrie A330.  The new Trent 500, under development for the
A340-500/600, has already won orders and options worth $5 billion from ten
airline customers.  

The story in the fast expanding regional jet market is equally compelling. 
The BR715 engine entered service on the Boeing 717 and has won orders for more
than 250 aircraft, while our AE3007 engine has an order book for more than
2,500 engines for Embraer aircraft.

In the corporate sector, the Tay 2000 has recently been chosen for the new
Gulfstream IV.   This order for 300 engines extends the Tay programme for a
further ten years.

Second, we have strong positions in our defence markets with key strategic
positions in the major aerospace programmes including both the Eurofighter
Typhoon, US Joint Strike Fighter, V22 Osprey and C130J.   Over their life,
these production programmes will be worth up to £15 billion.  In December, we
secured one of the first contracts to be announced under the UK's smart
procurement initiative when the ministry of defence placed an order to upgrade
Pegasus engines for the Royal Air Force.   The breadth of our portfolio and
the opportunities for provision of services to the armed forces provides a
sound basis for this sector.

Third, the acquisition of Vickers during the year doubled the scale of our
marine business and brought us a world leading position in marine propulsion
systems.  At the same time, the acquisition added a strong commercial business
to complement our existing naval operations.  We are now able to offer
customers, integrated design and supply of complete propulsion systems.  I am
pleased to be able to report that the Vickers businesses are performing well
up to the acquisition plan.

Fourth, we have been reshaping and investing heavily in our energy businesses.
 The company now has five industrial Trent power projects in operation or
commissioned and we expect to begin construction on two more in the UK within
the year.  We are also supplying two Trent engines for power projects in
Denmark.  We have made good progress reducing emissions and these developments
will give us a competitive advantage across the whole of our industrial gas
turbine product range.   In oil and gas, the acquisition of Cooper Cameron's
rotating machinery operation, enhanced our leading position in the oil and gas
industry for pumping, compression and offshore power generation.

Finally, in financial and aftermarket services which now account for 40 per
cent of Rolls-Royce sales, we have made several innovative moves.  Our joint
venture company Data Systems and Solutions completed its first full year of
trading, winning new orders worth more than $80 million for its asset
management and maintenance programmes.  Meanwhile the acquisition of National
Airmotive, one of the leading us aero and industrial engine overhaul
businesses, has further strengthened our position in the aftermarket.  

Having reviewed last year, let me turn to the future.  We are fortunate to be
supplying products into growth industries where, by offering truly world class
solutions to our customers, we have been able to capture a growing share of
their business. 

Nevertheless, if we are to continue to prosper and deliver a growing stream of
profits to shareholders from our record £11.5 billion order book, we must
continue to increase our efficiency and productivity in what is a notably
competitive industry.   We are reducing capital spend during the current year,
but we will continue our investment and cost reduction programmes.  This
underpins our double digit earnings growth target and will ensure we can
deliver long term value to you, our shareholders, on whose behalf we are
running the company.  


For further information:-

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