ROLLS-ROYCE HOLDINGS PLC

CONFIRMS TRADING OUTLOOK UNCHANGED

Rolls-Royce Holdings plc is today providing a brief update on its trading outlook and setting out the timetable for the transition of financial reporting and guidance under the new revenue recognition standard, IFRS 15.

Trading update: reconfirming full year outlook

Reconfirming his outlook comments from the Company's Half Year Results, Warren East, Chief Executive of Rolls-Royce, said: "We have made steady progress in the second half of the year. In Civil Aerospace, we continue to achieve our key targets for customer deliveries while managing in-service issues. Defence Aerospace and Power Systems are also performing satisfactorily, although Marine continues to be impacted by weak demand for products and services for the off-shore oil and gas market. Overall, while we have a good deal left to do in the last two months of the year, our performance for 2017, for revenue, profit and free cash, remains on track."

Looking beyond 2017, Warren East added: "Operationally, we are making good progress ramping up production, bringing new large civil engines to market and enhancing further our aftermarket capabilities across all our businesses. The installed Trent XWB-84 fleet has now achieved over 950,000 flight hours with strong in-service performance. At the same time, we are making progress reducing unit cash costs on original equipment sales of large civil engines. While markets for our Power Systems products continue to improve, we note the ongoing weakness in offshore oil and gas markets for Marine and timing changes to new export orders for Defence Aerospace. Our transformation programme is proceeding well, providing some of the cost savings that underpin our business performance while pursuing opportunities to further simplify our business structure and processes."

Commenting on the Company's long-term direction, Warren East added: "I am comfortable with our strategic direction and how we are investing in the long-term. We know that the growth in electrification and digitalisation will offer substantial and wide-ranging opportunities and we are now investing accordingly. The businesses in our portfolio have different roles to play as we create new cutting-edge technologies to deliver the cleanest, safest and most competitive solutions for our planet's vital power needs. By increasing our expertise and scale in activities where electrification is relevant today, such as Power Systems, we will be better placed to benefit where electrification is still some years away, such as for propulsion systems for Civil Aerospace. Taking the right steps today and tomorrow will enable us to realise our ambition to be the world's leading industrial technology company."

Transition to IFRS 15: Revenue from Contracts with Customers

From 1 January 2018 Rolls-Royce will adopt IFRS 15 and we will transition financial reporting to the new basis. This will involve making transition adjustments to our opening balance sheet and providing appropriate forward-looking comments reflecting the new accounting methodology. We intend to report full year 2017 results on both the current basis and using IFRS 15 where relevant. Guidance for 2018 will only be provided using IFRS 15, linking in to changes to our budgeting and planning processes. As prior year IFRS 15 comparatives will only be available when the 2017 results are published in March 2018, it will not be possible to provide 2018 guidance until then.

Our Full Year Results for 2017 will be announced on 7 March 2018.

This announcement contains forward-looking statements. Any statements that express forecasts, expectations and projections are not guarantees of future performance and will not be updated. By their nature, these statements involve risk and uncertainty, and a number of factors could cause material differences to the actual results or developments. This announcement is intended to provide information to shareholders, is not designed to be relied upon by any other party, or for any other purpose and the Company and its directors accept no liability to any other person other than under English law.

For further information, please contact:

Investors:

John Dawson                 +44 7557 287101

Helen Harman                +44 7968 906645

Ross Hawley                  +44 7920 822534

Media:

Richard Wray                +44 7810 850055

About Rolls-Royce Holdings plc

1.   Rolls-Royce's vision is to be the market-leader in high performance power systems where our engineering expertise, global reach and deep industry knowledge deliver outstanding customer relationships and solutions. We operate across five businesses: Civil Aerospace, Defence Aerospace, Marine, Nuclear and Power Systems.

2.   Rolls-Royce has customers in more than 150 countries, comprising more than 400 airlines and leasing customers, 160 armed forces, 4,000 marine customers including 70 navies, and more than 5,000 power and nuclear customers.

3.   We have three common themes across all our businesses:

·      Investing in and developing engineering excellence

·      Driving a manufacturing and supply chain transformation which will embed operational excellence in lean, lower-cost facilities and processes

·      Leveraging our installed base, product knowledge and engineering capabilities to provide customers with outstanding service through which we can capture aftermarket value long into the future.

4.   Annual underlying revenue was £13.8 billion in 2016, around half of which came from the provision of aftermarket services. The firm and announced order book stood at £80 billion at the end of 2016.

5.   In 2016, Rolls-Royce invested £1.3 billion on research and development. We also support a global network of 31 University Technology Centres, which position Rolls-Royce engineers at the forefront of scientific research.

6.   Rolls-Royce employs almost 50,000 people in 50 countries. More than 16,500 of these are engineers.

7.   The Group has a strong commitment to apprentice and graduate recruitment and to further developing employee skills. In 2016 we recruited 274 graduates and 327 apprentices through our worldwide training programmes.