Trading Statement

Rolls-Royce PLC
19 October 2001

                                                               19 October 2001

                               ROLLS-ROYCE plc

Rolls-Royce plc today, 19 October 2001, confirmed guidance for 2001 and issued
revised guidance for 2002, in the light of the events of 11 September.

*        2001 underlying earnings guidance unchanged

*        Revised 2002 planning assumptions

         *        Civil engine unit deliveries down 30 per cent against 2001

         *        Civil aftermarket revenues unchanged against 2001

*        Civil aerospace underlying profit before interest:

         *        expected to halve in 2002

         *        expected to grow in 2003

*        Jobs reduction of 5,000 (3,800 in the UK; 1,200 overseas)

*        Additional rationalisation provisions of £200 million in 2001

*        Average net debt in 2002 expected to be at the same level as in 2000

John Rose, Chief Executive, said: 'Following the tragic events of 11
September, we have undertaken an assessment of their likely impact on our
business.

'We expect difficult market conditions for civil aerospace in 2002 and 2003
and we are taking the necessary actions required to resize overheads and to
align cost and capacity with demand.  Regrettably this will have an impact on
employment in the company and its supply base.

'We will benefit from our broad business base, strong market positions and the
steps already taken through the rationalisation programme announced in August
2000.  Our longer term view is underpinned by our success in the market.'

Enquiries

Peter Barnes-Wallis                     Tim Blythe
Director of Financial Communications    Director of Corporate Communications

Tel: [phone]
www.rolls-royce.com

Rolls-Royce plc

Rolls-Royce plc announced today, 19 October 2001, that having reviewed market
conditions in the light of the events of 11 September, its 2001 underlying
trading performance is expected to be in line with earlier guidance.  The
company also issued revised guidance for 2002.

Against uncertain market conditions the company has completed an assessment of
the short-term impact on its business, based upon a review of the emerging
priorities of its customers.  The company will continue to review developing
market trends.

Based on this assessment, the company's planning assumptions for its civil
aerospace business in 2002 are that overall engine unit deliveries will be 30
per cent lower than in 2001.  The percentage decline in regional jet engine
deliveries is expected to be higher than in other sectors

After analysing expected fleet utilisation and retirements, the company
expects aftermarket services revenue in 2002 to be at a similar level to that
recorded in 2001, rather than growing as previously expected.  Rolls-Royce has
delivered more than 5,500 new civil engines in the last six years and has an
installed base of 9,000 civil engines.  This young fleet will make an
increasing contribution to aftermarket services revenue.

The company currently believes the events of 11 September will not have a
material impact on the overall performance of the defence, marine and energy
businesses, which together account for about half the company's business.

2001 update

While there has been an immediate impact on deliveries, prompt management
action to control discretionary expenditure is enabling the company to
mitigate the effects of the changing market environment on its financial
performance in 2001.

The company currently expects trading results for 2001 to be consistent with
its earlier guidance of unchanged underlying earnings per share, compared with
the previous year. Ongoing restructuring, included within underlying earnings,
will amount to approximately

£30 million in 2001. Average net debt for 2001 will be lower than in 2000.

As a result of the lower than expected demand for civil aerospace products and
services, the company is taking immediate steps to balance capacity with
demand.

It is planned that the workforce will be reduced from its current level of
43,500 by 5,000 employees; 3,800 in the UK, across its sites and 1,200
overseas. It is expected that the reduction will be largely achieved by the
end of the first quarter of 2002 and mainly impacts employment in the
aerospace businesses, which currently totals 28,000.

Rationalisation costs and provisions in 2001, excluded from underlying
earnings, are expected to comprise:

*        Charge of £90 million in respect of the previously announced,
         three-year, £150 million rationalisation programme. (£10 million was   
         incurred in 2000)

*        Provisions of:

         *        £50 million representing the balance of the existing          
                  rationalisation programme; and

         *        £150 million in respect of additional rationalisation costs   
                  arising from the change in trading outlook following the      
                  events of 11 September.

The full impact of all rationalisation programmes will be to reduce the
company's cost base by approximately £250 million per annum, underpinning
future financial performance and placing the company in a strong position to
benefit from recovery in the civil aerospace market.

2002 outlook

Civil aerospace sales in 2002 are expected to be approximately one billion
pounds lower than previously anticipated and about 25 per cent lower than in
2001.

Underlying profit before interest in civil aerospace is expected to be
approximately one half of the equivalent figure expected for 2001.  This
reduction arises largely from the margin impact of lower volumes, partly
mitigated by lower research and development expenditure and the benefits from
cost reduction programmes. There will be a reduction of 1,000 contract jobs,
which are not included in the permanent headcount.

The combination of lower operating profit and rationalisation expenditure will
have an adverse impact on cashflow.  For 2002, average net debt for the
company is now expected to be similar to the level reported in 2000.

The guidance, above, includes anticipated charges in respect of the impact of
civil aerospace market conditions on sales financing exposures.

Longer term outlook

Rolls-Royce operates in long-term growth markets, in which it has already
established strong positions.  The company believes that the current adverse
market conditions, while impacting short-term profitability and cashflow, do
not materially affect the long-term value of the business and the consistent
strategy which has been pursued. The company will maintain total programme
capability and will continue to invest in all current engine development
programmes.

*        In civil aerospace, the company expects engine sales to remain
depressed in 2003.  However, the company has a young and growing installed
base of engines which addresses all of the major civil aerospace sectors and
will generate increasing levels of aftermarket revenue.  This is expected to
result in underlying profit growth in the sector in 2003.

*        The company's defence business will continue to benefit from its
large installed base and its broad portfolio of current and new programmes.

*        The marine business has been strengthened by the acquisition of
Vickers and is expected to benefit from re-equipment in the naval market and a
strong flow of orders in the commercial offshore market.

*        The performance of the energy business will improve as new products
are introduced into service.  In particular, orders for the industrial Trent
are expected before the end of the year.

*        The financial services businesses are expected to make a growing
contribution, reflecting their underlying growth and increasing maturity.

The company will continue to provide information regarding the impact of
further developments in the market environment.

Conference call details 19 October 2001

A conference call will be held for analysts and investors at 09.45 hrs UK
time.

Call in numbers:  [phone] and [phone]

Conference title: Rolls-Royce analyst call

Instant replay will be available for a week after the call


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