REG-Rolls-Royce Grp Plc: Half-yearly Report

July 30 2009

ROLLS-ROYCE GROUP PLC
2009 HALF-YEAR RESULTS

Group Highlights

- Order book increased by £2bn to a record £57.5bn (2008 year-end £55.5bn).

- Group revenues increased to £5,142m (2008 first-half £4,049m). Revenues on an
underlying basis* increased by 17 per cent to £4,923m.

- Services revenues increased by eight per cent to £2,420m on an underlying
basis.

- Profit before financing was £593m (2008 first-half £322m).

- Underlying profit before taxation* increased by nine per cent to £445m (2008
first-half £410m).

- Net cash outflow of £234m (2008 first-half net cash outflow of £92m) before the
impact of a negative £194m (2008 first-half £48m benefit) foreign exchange
revaluation.

- Robust balance sheet with net cash of £1,030m at the half year (2008 year-end
£1,458m).

- Average net cash for the period of £760m (2008 first-half £265m).

- Interim payment to shareholders of six pence per share, an increase of five per
cent over 2008.

* see note 2

Sir John Rose, Chief Executive, said:

" The global trading environment remains very difficult and we believe the
recovery is likely to be slow.

"However, our growing order book, the breadth of the portfolio, our robust
balance sheet and the early action we have taken on costs underpin our
investment in the business.

"Our performance in the first half has enabled us to confirm our guidance for
the full year and to increase the interim payment to shareholders".

Group Overview

Resilient performance:

Rolls-Royce made progress in the first half of 2009 with the order book,
revenues and profits all increasing.

This performance was achieved despite the challenging external environment and
the impact of continuing delays on the Airbus A380 and Boeing 787 programmes.
The Board remains realistic about the severity of current trading conditions
which are in line with expectations at the start of 2009. The depth and
duration of the recession is unclear and there is no evidence yet of any
recovery.

Rolls-Royce has proved to be resilient in the face of these adverse conditions.
The breadth of the Group's business portfolio, the increasing importance of
service activities, the improved market share and strong financial position all
enable Rolls-Royce to manage the risks and uncertainties caused by current
trading conditions. The Board is therefore able to confirm the guidance for
2009 it gave in February and increase the shareholder payment for the
first-half to 6.00p per share, an increase of five per cent.

The advantages of a broad product and service portfolio are well illustrated in
the civil aerospace sector. Delays to the Airbus A380 and the Boeing 787
programmes have reduced planned capacity in the widebody sector by
approximately 300 aircraft or 100,000 seats over the next two years relative to
the industry's earlier assumptions. However, the delays have also had the
effect of generating firmer demand for existing widebody products where
Rolls-Royce enjoys a strong position. The Trent 700 on the A330 has, in
particular, enjoyed strong demand, with orders for almost 100 engines taken in
the first half. Almost 550 Trent 700s have been delivered over the last
fifteen years and a further 486 were in the order book at the end of the
first-half.

The Marine business continues to benefit from high levels of activity in the
oil and gas sector and enjoyed a good first half. Defence Aerospace benefits
from a broad portfolio and strong positions on the major military transport
aircraft programmes, while Energy is benefiting from the growing worldwide
demand for oil and gas and power generation.

Strengthening productivity and efficiency:

Overall performance is helped by the early steps taken to improve productivity
and operational efficiency and to reduce costs. This flexibility in the
matching of capacity to demand results in a competitive organisation capable of
responding to short-term challenges as well as delivering long-term growth.

Strong financial position:

The Group continues to enjoy a strong financial position. It finished the
first-half with a net cash balance of more than £1bn and had an average cash
position of £760m over the period. The successful issue of a 10-year, £500m
sterling bond in April reflected the market's confidence in the Group's
finances and effectively achieved an early refinancing of the Group's next
scheduled debt maturity in 2011.

Investing for growth:

The Group's trading performance, the scale of its order book and its ability to
manage short-term challenges allow it to invest to support growth and develop
new options for the business.

Rolls-Royce recently announced further significant investments in its
operational capacity and capability. Four new facilities will be developed in
the UK for discs, military fan blades, single crystal castings and civil
nuclear components at a total cost of around £300m. A new civil wide chord fan
blade facility will be constructed in Singapore to complement the existing
capability at Barnoldswick in the UK.

These investments illustrate the continuing development of the Group's global
operational footprint. Over the last five years Rolls-Royce has invested £1.4bn
in capital, including £800m to refresh its UK operational footprint. In 2007,
the Group announced that it would be proceeding with major new engine assembly
and test facilities at Seletar in Singapore and an advanced manufacturing
facility at Crosspointe in the Commonwealth of Virginia in the US. The timing
of these investments has been adjusted to reflect the delays in the major
airframe programmes. Construction of Crosspointe is expected to commence later
this year and Seletar in the first quarter of 2010.

The Group's services activities increased revenues by eight per cent in the
first half. Investment to support this growth is continuing with the expansion
of the Group's joint venture repair and overhaul facilities in Singapore and
Hong Kong which are scheduled for completion by 2010. Marine has opened new
service centres in Galveston, Seattle, Genoa and Rio de Janeiro, with
additional facilities planned in Canada, the UAE and West Africa in order to
support rapid growth.

The Group's ability to identify and pursue new options for global growth is
further illustrated by two developments in the year. In July the Marine
business broadened its involvement in the offshore oil and gas sector by taking
a 33 per cent shareholding in ODIM ASA. Similarly, significant progress was
made with the development of the Group's civil nuclear business when it was
announced that Rolls-Royce would be building a new civil nuclear manufacturing
facility and would be playing the leading role in the UK Government-supported
Nuclear Advanced Manufacturing Research Centre.

Trading Summary - 2009 First-Half

The Group's strong market positions have enabled it to secure orders worth
£7.9bn in the first-half, increasing the order book by four per cent to a record
£57.5bn at the end of the first-half. Around 60 per cent of the order book
will be delivered after 2011. The global economic recession, combined with
several years of strong order book build-up, contributed to a slow-down in new
orders over the period.

Revenues increased by 27 per cent to £5,142m, a performance that was positively
impacted by the weakness of the GBP against the USD and Euro. Underlying
revenues improved by 17 per cent, with a 27 per cent growth in original
equipment revenues (with all four businesses reporting a 20 per cent or higher
increase) and an eight per cent increase in service revenues.

The Group has continued to implement its long-running foreign exchange hedging
policy, increasing the USD hedge book during the first-half to $21.1bn to
provide more than five years of cover. The average rate of the outstanding
foreign exchange contracts in the book was £1~$1.63 at the end of the
first-half. The Group's achieved rate, the blended rate delivered from the
operation of the hedging activity, improved by two cents in the first-half. It
contributed a £12m transactional benefit to first-half profits. The achieved
rate is expected to improve by around two to three cents in the full year
compared to 2008. In addition, improved average USD, Euro and NOK exchange
rates relative to the GBP provided £35m of translation benefits.

Unit costs increased by around two per cent in the first-half reflecting the
continuing effects of the volatility of operational load across the supply
chain, programme delays and rising commodity costs. Unit cost performance
over the balance of the year will largely depend on the Group's ability to
manage load variations and any unforeseen events.

The Group has continued to invest in the acquisition and development of
technology. In the first half of 2009, investment in research and development
totalled £440m (2008 first-half £399m), of which the Group funded around
56 per cent, representing five per cent of underlying revenues. Net investment
in research and development is expected to be approximately 4.5 per cent of
underlying revenues for the full year. The Group announced earlier this week
its involvement in two UK Government-supported research and technology
programmes directed at low carbon and advanced manufacturing technologies. The
programmes have a total value of around £180m, with around half being funded by
Rolls-Royce and its partners.

Underlying profit before tax, which excludes the non-cash impact of the hedge
book and other financial instruments, increased by nine per cent to £445m (2008
first-half £410m). Good profit growth for the period reflected a significant
increase in original equipment and services revenues and foreign exchange
benefits. It also took account of higher R&D, increased unit costs and the
first-half phasing of fees received under the Trent XWB Risk and Revenue
Sharing Partnerships (RRSPs).

The Group's published profit before tax of £2,515m includes the effects of
"marking to market" its financial instruments, for which hedge accounting is
not adopted. This effectively reverses much of the revaluations reported in
the second half of 2008. The impact of mark to market is included within net
financing in the income statement (see note 3).

The first-half underlying tax charge of £85m benefited from a one-off £21m
credit following the successful completion of overseas tax audits. This
resulted in a reduction in the first-half underlying tax rate to 19.1 per
cent. The 2009 full year underlying tax rate is expected to be around
21 per cent.

The Group reported a net cash outflow of £428m for the period, with £194m of
this being caused by the revaluation of currency balances at the end of the
period. The remaining outflow of £234m reflected a slow-down in order flow and
associated customer deposits, increased inventory and significant investment in
the business.

Engine deliveries in the civil aerospace sector were achieved with little
recourse to financing support from Rolls-Royce. The commitments the Group has
made are insignificant in the context of the balance sheet and any additional
requests for support are discretionary.

Basic earnings per share were 100.87p (2008 first-half 16.22p), reflecting the
mark to market adjustments above, with underlying earnings per share increasing
by 15 per cent to 19.64p (2008 first-half 17.15p), partly reflecting an
improved tax rate.

Prospects

Rolls-Royce continues to benefit from the breadth of its portfolio, the robust
balance sheet and the early action it has taken on costs.

The Group expects that its global markets will continue to be affected by
reducing demand and the impact of financing constraints. However, underlying
revenues will continue to grow and underlying profits for the year are expected
to be broadly similar to those achieved in 2008. The Group continues to expect
a modest cash outflow for the whole of 2009 and an increase in the average net
cash balance for the full year compared with 2008. The Group is therefore
reiterating its guidance for the full year.

Enquiries

Investor relations:
Mark Alflatt
Director of Financial Communication
Rolls-Royce plc
Tel: +44 (0)20 7227 9246
mark.alflatt@rolls-royce.com

Media relations:
Nicky Louth-Davies
Director of Corporate Communications
Rolls-Royce plc
Tel: +44 (0)20 7227 9232
nicky.louth-davies@rolls-royce.com

www.rolls-royce.com

An interview on the results with Rolls-Royce Chief Executive, Sir John Rose, is
available on video, audio and text on www.rolls-royce.com and www.cantos.com.
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A copy of this half-yearly report in Portable Document Format (PDF) can be
downloaded from the investors section of the website at www.Rolls-Royce.com.

This Half Yearly Results Announcement contains certain forward-looking
statements. These forward-looking statements can be identified by the fact that
they do not relate only to historical or current facts. In particular, all
statements that express forecasts, expectations and projections with respect to
future matters, including trends in results of operations, margins, growth
rates, overall market trends, the impact of interest or exchange rates, the
availability of financing to the Company, anticipated cost savings or synergies
and the completion of the Company's strategic transactions, are forward-looking
statements. By their nature, these statements and forecasts involve risk and
uncertainty because they relate to events and depend on circumstances that may
or may not occur in the future. There are a number of factors that could cause
actual results or developments to differ materially from those expressed or
implied by these forward-looking statements and forecasts. The forward-looking
statements reflect the knowledge and information available at the date of
preparation of this Half Yearly Results Announcement, and will not be updated
during the year. Nothing in this Half Yearly Results Announcement should be
construed as a profit forecast.

REVIEW BY BUSINESS SEGMENT*1

Civil Aerospace
H1 2009 H1 2008
Engine deliveries 424 462
Underlying revenues (£m) 2,280 2,102
Underlying services revenues (£m) 1,337 1,322
Underlying profit before financing (£m) 257 272

The Civil Aerospace business' order book has continued to grow in the
first-half from £43.5bn at the end of 2008 to £46.7bn at the half-year. While
order activity for the first-half has been lower than in recent years, demand
for the major programmes has been encouraging, with engine orders totalling £
6.3bn for the A320, A330 and the A350 XWB.

The business continues to manage the consequences of further delays in airframe
programmes as well as weakening overall demand for aircraft capacity as a
result of the deteriorating global economy.

Total new engine deliveries in the first half of 424 included a record
103 Trent deliveries. Deliveries of smaller engines, however, were lower as
predicted. An increasing proportion of deliveries were on TotalCare™ service
contracts, which are an important driver of long-term service revenue growth.

Service revenues generated from long-term contracts (TotalCare and
CorporateCare™) continued to grow strongly, reflecting the increasing number of
engines under contract. The increasing significance of Trent deliveries in the
widebody sector saw installed thrust, and therefore the potential for future
service revenues, rise by 9m lbs to 357m lbs across the fleet. These trends are
largely offsetting the reduction in more discretionary Time and Materials (T&M)
service activities, resulting from the reduced scope of repair and overhaul
activity on some engines and increasing numbers of Rolls-Royce powered parked
aircraft compared to 2008.

Although the total number of additional parked aircraft has increased by 662 to
around 2,500 over the last 18 months, the number of additional Rolls-Royce
powered parked aircraft, at 148, has remained low, as older, less
fuel-efficient aircraft continue to be parked ahead of the relatively young,
fuel-efficient Rolls-Royce fleet. More than 80 per cent of total parked
aircraft are narrowbody and regional jets with the parked widebody population
being dominated by aircraft more than 20 years old such as the DC-10, Tristar
and early generation B747 aircraft to which Rolls-Royce has limited exposure.

The net result has been a strong increase of 21 per cent in revenues from new
engine deliveries compared to the first half of 2008 and a one per cent
increase in aftermarket revenues as the growing installed thrust on new
aircraft offsets the effects of lower utilisation levels and parked aircraft.

A number of important milestones were passed during the first-half. The
certification of the BR725 engine for the Gulfstream G650 aircraft, due to
enter service in 2012, was achieved ahead of schedule; the Trent 700EP entered
service and a number of upgrade kits have now been sold within TotalCare; the
Trent XWB "design freeze" was achieved on time and manufacture for early
assembly in 2010 commenced; and the 4,000th V2500 was delivered.

The changing revenue mix, increasing unit costs, higher R&D charges, partially
offset by an improving foreign exchange environment and higher RRSP fee income,
all contributed to lower reported margins and profits in the period.

Outlook

Global air travel and airfreight continue to be adversely impacted by the
economic downturn. Airframe delays and customer financing issues add to the
uncertainty surrounding future engine volumes. The Group continues to expect
engine deliveries to fall in 2009, with stable services revenues. Underlying
profits are expected to be lower in 2009 than in 2008.

Defence Aerospace
H1 2009 H1 2008
Engine deliveries 284 198
Underlying revenues (£m) 969 769
Underlying services revenues (£m) 496 441
Underlying profit before financing (£m) 136 104

The Defence Aerospace business has continued to make strong progress over the
period with the order book roughly unchanged at £5.4bn. There were increased
deliveries in the military transport sector supporting a 44 per cent increase
in original equipment revenues. Services revenues increased by 12 per cent,
reflecting the utilisation of a large installed fleet and foreign exchange
translation benefits.

In the military transport sector, a $222m engine contract for the V22-Osprey
covering delivery and in-service support for 96 engines from 2010 was signed in
the first-half, providing further evidence of the success of this programme.

Significant orders were also secured for AE2100 engines and service provision
for the C130-J; a $80m contract with the U.S. Air Force to provide spare
engines and parts; a $106m MissionCare™ contract with U.S. Naval Air Systems
Command (NAVAIR) to provide service support; and a $23m support services and
spares contract with the U.S. Air Force.

Both engine development programmes for the Joint Strike Fighter continued to
make progress. The F136, a joint programme with GE for all F-35 variants,
moved to engine test ahead of schedule and the LiftSystem® completed its first
hover-pit testing. As in previous years, uncertainty surrounds future funding
for the F136 contract and we await the conclusion of the legislative budgetary
process later in 2009.

Margins have been maintained with strong volume performance and translation
benefits offsetting increased unit costs and higher development spend, leading
to a 31 per cent increase in first-half underlying profits.

Outlook

Further strong growth in engine deliveries for the military transport and
combat sectors is expected to support another year of profit growth in 2009.

Marine
H1 2009 H1 2008
Underlying revenues (£m) 1,227 1,016
Underlying services revenues (£m) 376 326
Underlying profit before financing (£m) 110 87

The Marine business performed well despite challenging trading conditions. The
order book stands at £4.3bn reflecting new orders of £600m and modest
cancellations of £250m. Activity in the offshore oil and gas sector remains
encouraging, with continued deepwater developments in a number of major
offshore locations including Brazil, West Africa and Russia.

Major first-half developments included:

- The expansion of Marine's service capability, with two new centres opening
in the US, one each in Brazil and Italy and a further three underway in
Canada, UAE and West Africa. A new customer training facility is also
being developed in Norway.

- The launch of the next generation UT deepwater anchor handling design for
the offshore industry.

- Entry into service of the world's most powerful offshore vessel, the Far
Samson, designed and equipped by Rolls-Royce.

- The further extension of Marine's presence in the offshore sector with a
33 per cent investment in ODIM ASA.

The first-half saw strong growth in both original equipment revenues, which
increased by 23 per cent, and service revenues, up by 15 per cent. Services
growth reflected the increasing installed base of equipment and the expanding
service network.

Margins have been maintained despite some negative one-offs in the period. A
combination of improving operational performance, lower input costs and more
favourable contract pricing all contributed to a 26 per cent increase in
underlying profits in the first-half.

Outlook

The order book remains strong despite a slow down in new order activity.
Marine's market leading position in the offshore sector, demand for high
specification vessels and the opportunity to continue to develop services,
provide good visibility of future revenues and support continuing strong growth
in margins and profitability for the full year.

Energy
H1 2009 H1 2008
Engine deliveries 27 18
Underlying revenues (£m) 447 324
Underlying services revenues (£m) 211 153
Underlying profit before/(loss) financing (£m) 1 (8)

The global slowdown is impacting the oil and gas and power generation sectors
in different ways causing a small reduction in the order book to £1.1bn.
Multinational oil and gas companies continue to move ahead with substantial
investment plans, albeit more cautiously than in previous years, while the
progress of new power generation programmes has slowed due to a lack of
affordable project finance and lower demand for electricity.

Significant order growth in prior years and improved USD translation rates have
helped Energy deliver strong first-half underlying revenue growth across
original equipment and services, both of which grew by 38 per cent in the
first-half. Oil and gas activity has remained particularly robust and a
growing installed base and high utilisation rates are contributing to increased
service revenues across the oil and gas and power generation markets.

Operational performance is starting to benefit from the investment the Group
has made in new US facilities, such as new flow lines and test beds.

The tidal power generation demonstrator project is expected to start a 500kw
demonstration in the Pentland Firth, Scotland later in the year. Development
of the fuel cell technology programme is continuing but with investment at a
lower level than in prior years.

As a result of strong growth in revenues, improving operational performance and
reduced investment in fuel cells, first-half profits increased by £9m.

Outlook

Continued growth in original equipment and strong aftermarket growth,
especially in oil and gas activities, are expected to deliver improving
profitability in the second half of 2009 leading to strong growth for the full
year.

*1 Commentaries relate to underlying revenues and profits unless specifically
noted

Financial Review - H1 2009 Performance

Foreign exchange

The pace and extent of currency movements have had a significant effect on the
Group's financial reporting in the first half of 2009, with the GBP exchange
rates against the USD and the Euro having the biggest impact. These movements
have influenced both the reported income statement and the cash flow and
closing net cash position (as set out in the cash flow statement) in the
following ways:

1. Income statement - the most significant impact was the period end mark to
market of outstanding financial instruments (foreign exchange contracts,
interest rate, commodity and jet fuel swaps). The principal adjustments
related to the GBP~USD hedge book.

The principal spot rate movements in the first half of 2009 were as follows:

Jan 1 2009 June 30 2009
GBP~USD £1~$1.438 £1~$1.647
GBP~Euro £1~€1.034 £1~€1.174
Oil - Spot Brent $49/bbl $69/bbl

The average rates throughout the period were:
H1 2009 H12008 FY 2008
GBP ~ USD £1~$1.493 £1~$1.974 £1~$1.854
GBP ~ Euro £1~€1.119 £1~€1.291 £1~€1.258

The impact of the period end mark to market on all of the outstanding financial
instruments is included within net financing in the income statement and caused
a net £1,909m gain (2008 first-half £75m gain), contributing to a published
profit before tax of £2,515m (compared to £389m reported in the first half of
2008). These adjustments are non-cash, accounting adjustments required under
IAS 39 and do not, therefore, reflect the underlying trading performance of the
Group for the period.

Underlying profit before finance costs of £478m benefited from a £47m foreign
exchange benefit compared to the first half of 2008. The achieved rate on
selling net USD income was two cents better in the period than in the first
half of 2008, contributing £12m of the first-half underlying profit
improvement, and is expected to be between two to three cents better for the
full year compared to full year 2008.

In addition, the significant improvement in the average GBP~USD and GBP~Euro
exchange rates, 48 and 17 cents respectively, contributed translation benefits
totalling £35m of the first-half underlying profit improvement. Translation
benefits for the full year are expected to reduce from the £35m reported in the
first-half given improved rates experienced in the second half of 2008.

2. Balance sheet and cash flow - The Group maintains a number of currency cash
balances which vary throughout the financial year. Given the significant
movements in foreign exchange rates in the period, a number of these cash
balances were impacted by the weaker rates at the period end causing a
reduction of £194m in the periodic cash flow and hence the closing balance
sheet cash position.

Income statement

The firm and announced order book, at constant exchange rates, was £57.5bn
(2008 year-end £55.5bn) after reflecting new order intake of £7.9bn in the
period. Aftermarket services included in the order book totalled £16.2bn
(2008 year-end £14.5bn).

Revenues increased by 27 per cent, compared with 2008, to £5,142m. Revenues on
an underlying basis grew by 17 per cent. Payments to industrial RRSPs, charged
in cost of sales, amounted to £151m (2008 first-half £117m).

Gross research and development investment was £440m (2008 first-half £399m).
Net research and development investment, charged to the income statement was
£200m (2008 first-half £177m) after net capitalisation of £46m
(2008 first-half £45m) on development programmes in the period. Receipts from
RRSPs in respect of new programme developments, shown as other operating
income, were £68m (2008 first-half £13m), as key partners joined major new
programmes, primarily the Trent XWB.

Restructuring costs of £37m (2008 first-half £60m) were charged, reflecting the
ongoing reduction in headcount.

Underlying profit margins before financing fell by approximately 0.5 per cent
to 9.7 per cent in the period, reflecting strong growth in lower margin
original equipment and an increase in unit costs of around two per cent
relative to 2008, partially offset by both transactional and translational
foreign exchange benefits of £47m.

Net financing income was £1,922m (2008 first-half £67m) including the effects
of mark to market revaluations. Underlying finance costs increased to £33m
(2008 first-half £17m) reflecting lower interest rates on cash deposits.

The income statement tax charge of £658m (2008 first-half £97m), reflects the
large mark to market gain caused by the revaluation of various financial
instruments at the period end. The taxation charge on an underlying basis was
£85m (2008 first-half £101m), representing 19.1 per cent of underlying profit
before tax. The underlying rate benefited from the settlement of certain
overseas tax audits and is affected by the geographical mix of profits, changes
in legislation and the benefit of research and development tax credits. The
2009 full year underlying tax rate is expected to be around 21 per cent.

Underlying profit before tax was £445m (2008 first-half £410m). Underlying
earnings per share increased by 15 per cent, to 19.64p (2008 first-half 17.15p)
(see note 5).

Balance sheet and cash flow

Investment in intangibles during the period was £167m (2008 first-half £122m)
and included £75m (2008 first-half £32m) for recoverable engine costs, £61m
(2008 first-half £57m) for capitalised development costs and a further £26m
(2008 first-half £25m) for certification costs and participation fees.

The continued development and replacement of operational facilities contributed
to a total investment in property, plant and equipment of £109m
(2008 first-half £105m). Overall investment in tangible and intangible assets
for the full year 2009 is expected to be similar to 2008.

The overall net position of assets and liabilities for TotalCare packages on
the balance sheet was an asset of £903m (2008 year-end £848m) and the movements
include new agreements, timing of overhauls and changes in foreign exchange
rates.

Provisions were £377m (2008 year-end £369m). Provisions carried forward in
respect of potential customer financing exposure were unchanged at £73m.

Working capital increased by £287m during the period, with increased inventory
of £123m and other financial working capital increasing by £164m. Inventory
increased in the period in support of growth and partly reflecting disruption
caused by programme changes. Deposits from new orders were weak given reduced
order flow in the period.

Cash outflow in the period of £428m (2008 first-half £44m) included a £194m
outflow (2008 first-half £48m benefit) relating to the period end revaluation
of foreign currency cash balances given weaker USD and Euro exchange rates
compared to the start of the period.

Continued growth in underlying profits was offset by increased cash investments
of £276m (2008 first-half £227m) in plant and equipment and intangible assets
and payments to shareholders of £101m (2008 first-half £58m). Tax payments
increased by £18m to £50m in the period.

Average net cash for the period was £760m (2008 first-half £265m). The net
cash balance at the period-end was £1,030m (2008 year-end £1,458m). The
Group's full year cash flow is expected to be affected by higher pension
contributions, reduced deposits and progress payments and increased payments to
shareholders which largely reflect the removal of the conversion option in
2008. In addition, the Group may be asked to provide financial support on a
case by case basis to some customers and suppliers. As a result, we continue
to expect that there will be a cash outflow in 2009. However, the average net
cash balance is expected to increase from the 2008 full-year average of £375m.

There were no material changes to the Group's gross and net contingent
liabilities in the period. Contingent liabilities include commitments made to
civil aerospace customers in the form of asset value guarantees (AVGs) and
credit guarantees. At the end of June 2009, the gross level of commitments on
delivered aircraft was $1,153m (£699m), including $642m for AVGs and $511m for
credit guarantees. The net exposure after reflecting the level of security was
$237m (£144m).

The declared interim payment to shareholders is equivalent to 6.00 pence per
ordinary share (2008 interim payment 5.72p), a five per cent increase over the
2008 interim. The payment to shareholders will, as before, be made in the form
of redeemable C Shares which shareholders may either choose to retain or redeem
for a cash equivalent. The Registrar, on behalf of the Company, operates a
C Share Reinvestment Plan (CRIP) and can, on behalf of shareholders, purchase
ordinary shares from the market rather than delivering a cash payment.

The interim payment is payable on January 5, 2010 to shareholders on the
register on October 30, 2009. The final day of trading with entitlement to
C Shares is October 27, 2009.

Condensed consolidated income statement
For the half-year ended June 30, 2009

Restated*
Half-year Half-year Year to
to June to June December
30, 2009 30, 2008 31, 2008
Notes £m £m £m
Revenue 2 5,142 4,049 9,082
Cost of sales (4,054) (3,214) (7,278)
Gross profit 1,088 835 1,804
Other operating income 68 13 79
Commercial and administrative costs (407) (383) (699)
Research and development costs (200) (177) (403)
Share of profit of joint ventures 47 33 74
Operating profit 596 321 855
(Loss)/profit on sale or termination of
businesses (3) 1 7
Profit before financing 593 322 862

Financing income 3 2,170 359 432
Financing costs 3 (248) (292) (3,186)
Net financing 1,922 67 (2,754)

Profit/(loss) before taxation *1 2,515 389 (1,892)
Taxation (658) (97) 547
Profit/(loss) for the period 1,857 292 (1,345)

Attributable to:
Equity holders of the parent 1,859 294 (1,340)
Minority interests (2) (2) (5)
Profit/(loss) for the period 1,857 292 (1,345)

* During the period, the Group has reviewed the allocation of costs. As a
result, costs of £17m (2008 full year £33m) classified as costs of sales in
2008 have been reclassified as commercial and administrative costs.

Earnings per ordinary share *2
Basic 5 100.87p 16.22p (73.63p)
Diluted 5 99.95p 15.97p (73.63p)

Payments to shareholders in respect of the period
Pence per share 6 6.00p 5.72p 14.30p
Total (£m) 6 111 105 263

*1 Underlying profit before taxation 2 445 410 880

*2 Underlying earnings per share are shown in note 5.

Condensed consolidated statement of comprehensive income
For the half-year ended June 30, 2009

Restated *
Half-year Half-year Year to
to June to June December
30, 2009 30, 2008 31, 2008
£m £m £m
Profit/(loss) for the period 1,857 292 (1,345)
Other comprehensive income
Foreign exchange translation differences from
foreign operations (288) 109 603
Net actuarial gains - - 944
Movement in unrecognised post-retirement
surplus (24) (43) (928)
Movement in post-retirement minimum funding
liability 25 24 66
Transfers from transition hedging reserve (27) (66) (80)
Transfers to cash flow hedging reserve 12 - (41)
Related tax movements (1) 23 (4)
Total comprehensive income for the period 1,554 339 (785)

Attributable to:
Equity holders of the parent 1,557 341 (782)
Minority interests (3) (2) (3)
Total comprehensive income for the period 1,554 339 (785)

* 2008 figures have been restated to reflect the adoption of IFRIC 14 with
effect from January 1, 2008 - see note 10.

Condensed consolidated balance sheet
At June 30, 2009

Restated *
June June December
30, 2009 30, 2008 31, 2008
Notes £m £m £m
ASSETS
Non-current assets
Intangible assets 7 2,286 1,885 2,286
Property, plant and equipment 1,916 1,792 1,995
Investments - joint ventures 336 298 345
Other investments 55 57 53
Deferred tax assets 170 110 804
Post-retirement scheme surpluses 10 455 221 453
5,218 4,363 5,936

Current assets
Inventory 2,589 2,453 2,600
Trade and other receivables 3,802 3,069 3,929
Taxation recoverable 9 7 9
Other financial assets 9 776 498 390
Short-term investments 1 1 1
Cash and cash equivalents 2,716 1,844 2,471
Assets held for sale 9 24 12
9,902 7,896 9,412
Total assets 15,120 12,259 15,348

LIABILITIES
Current liabilities
Borrowings (6) (13) (23)
Other financial liabilities 9 (743) (159) (2,450)
Trade and other payables (5,301) (4,647) (5,735)
Current tax liabilities (153) (198) (184)
Provisions (204) (163) (181)
(6,407) (5,180) (8,573)

Non-current liabilities
Borrowings 8 (1,879) (1,040) (1,325)
Other financial liabilities 9 (424) (320) (391)
Trade and other payables (1,306) (1,026) (1,318)
Non-current tax liabilities (1) - (1)
Deferred tax liabilities (309) (292) (307)
Provisions (173) (161) (188)
Post-retirement scheme deficits 10 (930) (811) (1,020)
(5,022) (3,650) (4,550)
Total liabilities (11,429) (8,830) (13,123)

Net assets 3,691 3,429 2,225

EQUITY
Capital and reserves
Called-up share capital 371 364 369
Share premium account 97 67 82
Capital redemption reserves 200 185 204
Hedging reserves (29) 29 (22)
Other reserves 368 171 663
Retained earnings 2,677 2,603 920
Equity attributable to equity holders of the
parent 3,684 3,419 2,216
Minority interests 7 10 9
Total equity 3,691 3,429 2,225

* 2008 figures have been restated to reflect the adoption of IFRIC 14 with
effect from January 1, 2008 - see note 10.

Condensed consolidated cash flow statement
For the half-year ended June 30, 2009

Half-year Half-year Year to
to June to June December
30, 2009 30, 2008 31, 2008
Notes £m £m £m
Reconciliation of cash flows from operating
activities
Profit/(loss) before taxation 2,515 389 (1,892)
Share of profit of joint ventures (47) (33) (74)
Loss/(profit) on sale or termination of
businesses 3 (1) (7)
Profit on sale of property, plant and
equipment (16) (13) (11)
Net interest payable 3 18 5 10
Net post-retirement scheme financing 3 50 13 22
Net other financing 3 (1,990) (85) 2,722
Taxation paid (50) (32) (117)
Amortisation of intangible assets 7 57 56 107
Depreciation of property, plant and
equipment 93 92 208
Increase in provisions 30 16 39
Increase in inventories (123) (250) (208)
Increase in trade and other receivables (97) (490) (1,072)
(Decrease)/increase in trade and other
payables (67) 406 1,242
(Increase)/decrease in other financial
assets and liabilities (184) 223 144
Additional cash funding of post-retirement
schemes (73) (58) (117)
Share-based payments charge 15 17 40
Transfers of hedge reserves to income
statement (27) (66) (80)
Dividends received from joint ventures 30 22 59
Net cash inflow from operating activities 137 211 1,015

Cash flows from investing activities
Additions of unlisted investments (3) (1) (1)
Disposals of unlisted investments - 1 6
Additions of intangible assets (167) (122) (389)
Purchases of property, plant and equipment (109) (105) (286)
Disposals of property, plant and equipment 29 42 68
Acquisition of businesses (1) (8) (50)
Disposals of businesses - - 6
Investments in joint ventures (5) (9) (32)
Disposals of joint ventures 2 13 30
Net cash outflow from investing activities (254) (189) (648)

Cash flows from financing activities
Borrowings due within one year - repayment
of loans (10) (3) (1)
Borrowings due after one year - increase in
loans/(repayment) 692 (25) (22)
Capital element of finance lease payments (1) (2) (4)
Net cash inflow/(outflow) from increase/
(decrease) in borrowings 681 (30) (27)
Interest paid (48) (55) (53)
Interest received 30 43 52
Interest element of finance lease payments - - (1)
Decrease in government securities and
corporate bonds - 39 39
Issue of ordinary shares 17 - 17
Purchase of own shares (16) (44) (44)
Other transactions in own shares - - (4)
Redemption of B/C Shares (101) (58) (200)
Net cash inflow/(outflow) from financing
activities 563 (105) (221)

Increase/(decrease) in cash and cash
equivalents 446 (83) 146
Cash and cash equivalents at January 1 2,462 1,872 1,872
Foreign exchange (195) 48 441
Net cash of businesses acquired/disposed 1 - 3
Cash and cash equivalents at period end 2,714 1,837 2,462

Half-year Half-year Year to
to June to June December
30, 2009 30, 2008 31, 2008
£m £m £m
Reconciliation of increase in cash and cash
equivalents to movements in net funds
Increase/(decrease) in cash and cash equivalents 446 (83) 146
Cash inflow from decrease in government
securities and corporate bonds - (39) (39)
Net cash (inflow)/outflow from (increase)/
decrease in borrowings (681) 30 27
Change in net funds resulting from cash flows (235) (92) 134
Net funds of businesses acquired/disposed 1 - (3)
Exchange adjustments (194) 48 439
Fair value adjustments 136 (37) (319)
Movement in net funds (292) (81) 251
Net funds at January 1 excluding the fair value
of swaps 1,124 873 873
Net funds at period end excluding the fair value
of swaps 832 792 1,124
Fair value of swaps hedging fixed rate borrowings 198 52 334
Net funds at period end 1,030 844 1,458

The movement in net funds (defined by the Group as including the items shown
below) is as follows:

At Net funds of Non At June
January Funds business cash Fair 30,
1, 2009 flow acquired flow Exchange value 2009
£m £m £m £m £m £m £m
Cash at bank and in
hand 940 321 1 - (89) - 1,173
Overdrafts (9) 6 - - 1 - (2)
Short-term deposits 1,531 119 - - (107) - 1,543
Cash and cash
equivalents 2,462 446 1 - (195) - 2,714
Investments 1 - - - - - 1
Other borrowings due
within one year (11) 10 - (1) - - (2)
Borrowings due after
one year (1,324) (692) - 1 1 136 (1,878)
Finance leases (4) 1 - - - - (3)
1,124 (235) 1 - (194) 136 832
Fair value of swaps
hedging fixed rate
borrowings 334 (136) 198
1,458 (235) 1 - (194) - 1,030

Condensed consolidated statement of changes in equity
For the half-year ended June 30, 2009

Attributable to equity holders of the parent
Capital
Share Share redemption Hedging Other Retained Minority Total
capital premium reserves reserves reserves earnings Total interests equity
£m £m £m £m £m £m £m £m £m
At January 1,
2008 364 67 191 77 62 2,776 3,537 12 3,549
Adoption of
IFRIC 14
(note 10) - - - - - (353) (353) - (353)
At January 1,
2008 restated 364 67 191 77 62 2,423 3,184 12 3,196
Half-year to
June 30, 2008
Total
comprehensive
income - - - (48) 109 280 341 (2) 339
Issue of B
Shares - - (73) - - - (73) - (73)
Redemption
of B Shares - - 58 - - (58) - - -
Conversion
of B Shares
into ordinary
shares - - 9 - - - 9 - 9
Ordinary
shares
purchased - - - - - (44) (44) - (44)
Ordinary
shares
vesting in
share-based
payment plans - - - - - 35 35 - 35
Share-based
payment
adjustment - - - - - (18) (18) - (18)
Related tax
movements - - - - - (15) (15) - (15)
At June 30,
2008 364 67 185 29 171 2,603 3,419 10 3,429
Half-year to
December 31,
2008
Total
comprehensive
income - - - (51) 492 (1,564) (1,123) (1) (1,124)
Arising on
issue of
ordinary
shares 2 15 - - - - 17 - 17
Issue of B
Shares - - (164) - - - (164) - (164)
Redemption
of B Shares - - 142 - - (142) - - -
Conversion
of B Shares
into ordinary
shares 3 - 41 - - - 44 - 44
Ordinary
shares
vesting in
share-based
payment plans - - - - - 2 2 - 2
Share-based
payment
adjustment - - - - - 17 17 - 17
Related tax
movements - - - - - 4 4 - 4
At December
31, 2008 369 82 204 (22) 663 920 2,216 9 2,225
Half-year to
June 30, 2009
Total
comprehensive
income - - - (7) (295) 1,859 1,557 (3) 1,554
Arising on
issue of
ordinary
shares 2 15 - - - - 17 - 17
Issue of C
Shares - - (105) - - - (105) - (105)
Redemption
of C Shares - - 101 - - (101) - - -
Ordinary
shares
purchased - - - - - (16) (16) - (16)
Ordinary
shares
vesting in
share-based
payment plans - - - - - 22 22 - 22
Share-based
payment
adjustment - - - - - (7) (7) - (7)
Transactions
with minority
interests - - - - - - - 1 1
Related tax
movements - - - - - - - - -
At June 30,
2009 371 97 200 (29) 368 2,677 3,684 7 3,691

1. Basis of preparation and accounting policies

Reporting entity

Rolls–Royce Group plc is a company domiciled in the UK. These condensed
consolidated half-year financial statements of the Company as at and for the
six months ended June 30, 2009 comprise the Company and its subsidiaries
(together referred to as the "Group") and the Group's interests in joint
ventures.

The consolidated financial statements of the Group as at and for the year ended
December 31, 2008 (2008 Annual report) are available upon request from the
Company Secretary, Rolls­­­–Royce Group plc, 65 Buckingham Gate, London SW1E 6AT.

Statement of compliance

These condensed consolidated half-year financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by the
European Union. They do not include all of the information required for full
annual statements, and should be read in conjunction with the 2008 Annual
report.

The comparative figures for the financial year December 31, 2008 are not the
Group's statutory accounts for that financial year. Those accounts have been
reported on by the Group's auditors and delivered to the registrar of
companies. The report of the auditors was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.

The Board of directors approved the condensed consolidated half-year financial
statements on July 29, 2009.

Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated
half-year financial statements are the same as those that applied to the
consolidated financial statements of the Group for the year ended
December 31, 2008, with the following exceptions:

- IFRS 8 Operating Segments has been adopted. Under IFRS 8, reportable segments
are determined on the basis of those segments whose operating results are
regularly reviewed by the Board. These operating results are prepared on a
basis that excludes items considered to be non-underlying in nature. Note 2 of
the condensed consolidated financial statements sets out the Group's reportable
segments and sets out reconciliations between these and the results reported in
the income statement and balance sheet.

- IAS 23 Borrowing Costs (as revised) has been adopted. IAS 23 requires
borrowing costs that are directly attributable to the acquisition, construction
or production of certain assets to be capitalised as part of the cost of the
asset. IAS 23 has been adopted prospectively from January 1, 2009. No
borrowing costs were eligible for capitalisation during the six months ended
June 30, 2009.

- IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction has been adopted with effect from
January 1, 2008. IFRIC 14 requires that, where the Group is committed to
making future contributions to post-retirement schemes in respect of past
service, and those contributions will result in an unrecognisable surplus, a
liability for the future contributions should be recognised.

Key sources of estimation uncertainty

In applying the accounting policies, management has made appropriate estimates
in many areas, and the actual outcome may differ from those calculated. The key
sources of estimation uncertainty at the balance sheet date were the same as
those that applied to the consolidated financial statements of the Group for
the year ended December 31, 2008.

2. Analysis by business segment

The analysis by business segment is presented in accordance with the basis set
out in IFRS 8 Operating segments. The analyses for 2008 have been restated on
a consistent basis.

The operating results are prepared on an underlying basis that excludes items
considered to be non-underlying in nature. The principles adopted are:

Underlying revenues - Where revenues are denominated in a currency other than
the functional currency of the Group undertaking, these exclude the release of
the foreign exchange transition hedging reserve and reflect the achieved
exchange rates arising on settled derivative contracts.

Underlying profit before financing - Where transactions are denominated in a
currency other than the functional currency of the Group undertaking, this
excludes the release of the foreign exchange transition hedging reserve and
reflects the transactions at the achieved exchange rates on settled derivative
contracts.

Underlying profit before taxation - In addition to those adjustments in
underlying profit before financing, this:

- Includes amounts realised from settled derivative contracts and revaluation of
relevant assets and liabilities to exchange rates forecast to be achieved from
future settlement of derivative contracts.

- Excludes unrealised amounts arising from revaluations required by IAS 39
Financial Instruments: Recognition and Measurement, changes in value of
financial RRSP contracts arising from changes in forecast payments and the net
impact of financing costs related to post-retirement scheme benefits.

This analysis also includes a reconciliation of the underlying results to those
reported in the consolidated income statement.

Half-year to June 30, 2009 Half-year to June 30, 2008 Year to December 31, 2008
Original Original Original
equipment Aftermarket Total equipment Aftermarket Total equipment Aftermarket Total
£m £m £m £m £m £m £m £m £m
Underlying
revenues
Civil
aerospace 943 1,337 2,280 780 1,322 2,102 1,776 2,726 4,502
Defence
aerospace 473 496 969 328 441 769 739 947 1,686
Marine 851 376 1,227 690 326 1,016 1,492 712 2,204
Energy 236 211 447 171 153 324 385 370 755
2,503 2,420 4,923 1,969 2,242 4,211 4,392 4,755 9,147

Half-year to Half-year to Year to
June 30, 2009 June 30, 2008 December 31, 2008
£m £m £m
Underlying profit before
financing
Civil aerospace 257 272 566
Defence aerospace 136 104 223
Marine 110 87 183
Energy 1 (8) (2)
Reportable segments 504 455 970
Central items (26) (28) (51)
478 427 919
Underlying net financing (33) (17) (39)
Underlying profit before
taxation 445 410 880
Underlying taxation (85) (101) (217)
Underlying profit for
the period 360 309 663

Attributable to:
Equity holders of the
parent 362 311 668
Minority interests (2) (2) (5)
Total comprehensive
income for the period 360 309 663

Net assets/
Total assets Total liabilities (liabilities)
Restated * Restated * Restated *
June June December June June December June June December
30, 30, 31, 30, 30, 31, 30, 30, 31,
2009 2008 2008 2009 2008 2008 2009 2008 2008
Net assets/
(liabilities)
Civil aerospace 7,835 6,593 7,543 (5,164) (3,808) (7,213) 2,671 2,785 330
Defence aerospace 1,102 959 1,037 (1,390) (1,129) (1,234) (288) (170) (197)
Marine 2,375 2,067 2,339 (1,845) (1,462) (1,851) 530 605 488
Energy 922 729 834 (415) (401) (442) 507 328 392
Reportable
segments 12,234 10,348 11,753 (8,814) (6,800) (10,740) 3,420 3,548 1,013
Eliminations (663) (324) (477) 663 324 477 - - -
Net funds 2,915 1,897 2,806 (1,885) (1,053) (1,348) 1,030 844 1,458
Tax assets/
(liabilities) 179 117 813 (463) (490) (492) (284) (373) 321
Unallocated
post-retirement
scheme surpluses/
(deficits) 455 221 453 (930) (811) (1,020) (475) (590) (567)
15,120 12,259 15,348 (11,429) (8,830) (13,123) 3,691 3,429 2,225

* 2008 figures have been restated to reflect the adoption of IFRIC 14 with
effect from January 1, 2008 - see note 10.

Half-year Half-year Year to
to June to June December
30, 2009 30, 2008 31, 2008
Group employees at
period end
Civil aerospace 21,700 22,300 22,600
Defence aerospace 5,500 5,700 5,700
Marine 8,600 8,000 8,300
Energy 2,500 2,500 2,300
38,300 38,500 38,900

Underlying revenue adjustments

Half-year Half-year Year to
to June to June December
30, 2009 30, 2008 31, 2008
£m £m £m

Underlying revenue 4,923 4,211 9,147
Release of transition hedging
reserve 27 66 80
Exclude achieved rate of
settled derivative contracts 192 (228) (145)
Revenue per consolidated income
statement 5,142 4,049 9,082

Underlying profit adjustments

Half-year to Half-year to Year to
June 30, 2009 June 30, 2008 December 31, 2008
Profit Profit Profit Profit Profit Profit
before before before before before before
financing tax financing tax financing tax

£m £m £m £m £m £m

Reportable segments 504 455 970

Central items (26) (28) (51)

Underlying profit 478 445 427 410 919 880

Release of transition
hedging reserve 27 27 66 66 80 80

Realised gains on settled
derivative contracts*1 182 248 (191) (235) (185) (292)

Net unrealised fair value
changes to derivative
contracts*2 10 1,949 - 135 4 (2,475)

Effect of currency on
contract accounting (104) (104) 20 20 44 44

Revaluation of trading
assets and liabilities - (8) - (2) - 14

Financial RRSPs - foreign
exchange differences and
changes in forecast
payments - 8 - 8 - (121)

Net post-retirement scheme
financing - (50) - (13) - (22)

Total underlying
adjustments 115 2,070 (105) (21) (57) (2,772)

Profit/(loss) per
consolidated income
statement 593 2,515 322 389 862 (1,892)

*1 2008 excluded £24m of realised losses on derivative contracts settled in
respect of trading cash flows that would occur after the year end. £10m of
these realised losses have been recognised in the period to June 30, 2009.

*2 Profit before financing includes £9m of unrealised losses for which the
related trading contracts have been cancelled, and includes £1m of unrealised
losses (2008: half year nil, full year £4m gain) in respect of derivative
contracts held by joint venture undertakings.

3. Net financing

Half-year to June 30, Half-year to June 30, Year to December 31,
2009 2008 2008
Per Per Per
consolidated Underlying consolidated Underlying consolidated Underlying
income net income net income net
statement financing statement financing statement financing
£m £m £m £m £m £m
Financing
income
Interest
receivable 13 13 31 31 59 59
Fair value
gains on
foreign
currency
contracts 1,909 - 75 - - -
Financial RRSPs
- foreign
exchange
differences and
changes in
forecast
payments 8 - 8 - - -
Fair value
gains on
commodity
derivatives 30 - 60 - - -
Expected return on
post-retirement
scheme assets 152 - 185 - 373 -
Net foreign
exchange gains 58 - - - - -
2,170 13 359 31 432 59
Financing costs
Interest
payable (31) (31) (36) (36) (69) (69)
Fair value
losses on
foreign
currency
contracts - - - - (2,383) -
Financial RRSPs
- foreign
exchange
differences and
changes in
forecast
payments - - - - (121) -
Financial
charge relating
to financial
RRSPs (14) (14) (12) (12) (26) (26)
Fair value
losses on
commodity
derivatives - - - - (96) -
Interest on
post-retirement
scheme
liabilities (202) - (198) - (395) -
Net foreign
exchange losses - - (46) - (91) -
Other financing
charges (1) (1) - - (5) (3)
(248) (46) (292) (48) (3,186) (98)

Net financing 1,922 (33) 67 (17) (2,754) (39)

Analysed as:
Net interest
payable (18) (18) (5) (5) (10) (10)
Net
post-retirement
scheme
financing (50) - (13) - (22) -
Net other
financing 1,990 (15) 85 (12) (2,722) (29)
Net financing 1,922 (33) 67 (17) (2,754) (39)

4. Taxation

The effective tax rate for the half-year is 26.2% (2008 half-year 24.9%, full
year 28.9%). The first half tax charge benefited from a one-off £21m credit
following the successful completion of certain overseas tax audits.

5. Earnings per ordinary share (EPS)

Basic EPS is calculated by dividing the profit attributable to ordinary
shareholders by the weighted average number of ordinary shares in issue during
the period, excluding ordinary shares held under trust, which have been treated
as if they had been cancelled.

Diluted EPS is calculated by dividing the profit attributable to ordinary
shareholders by the weighted average number of ordinary shares in issue during
the period as above, adjusted by the bonus element share options.

Half-year to June 30, Half-year to June 30, Year to December 31,
2009 2008 2008
Potentially Potentially Potentially
dilutive dilutive dilutive
share share share
Basic options Diluted Basic options Diluted Basic options*1 Diluted
Profit/
(loss)
(£m) 1,859 - 1,859 294 - 294 (1,340) - (1,340)
Weighted
average
number of
shares
(millions) 1,843 17 1,860 1,813 28 1,841 1,820 - 1,820
EPS
(pence) 100.87 (0.92) 99.95 16.22 (0.25) 15.97 (73.63) - (73.63)

*1 As the basic EPS is negative, in accordance with IAS 33 Earnings per Share,
share options are not considered dilutive.

The reconciliation between underlying EPS and basic EPS is as follows:

Half-year to Half-year to Year to
June 30, 2009 June 30, 2008 December 31, 2008
Pence £m Pence £m Pence £m
Underlying EPS / Underlying
profit attributable to equity
holders of the parent 19.64 362 17.15 311 36.70 668
Total underlying adjustments
to profit before tax (note 2) 112.32 2,070 (1.15) (21) (152.31) (2,772)
Related tax effects (31.09) (573) 0.22 4 41.98 764
Basic EPS / Profit
attributable to equity
holders of the parent 100.87 1,859 16.22 294 (73.63) (1,340)

6. Payments to shareholders in respect of the period

Payments to shareholders in respect of the period represent the value of
C Shares to be issued in respect of the results for the period. Issues of
C Shares were declared as follows:

Half-year to Year to
June 30, 2009 December 31, 2008
Pence per Pence per
share £m share £m
Interim 6.00 111 5.72 105
Final 8.58 158
14.30 263

7. Intangible assets

Certification
costs and Recoverable Software
participation Development engine and
Goodwill fees expenditure costs other Total
£m £m £m £m £m £m
Cost:
At January 1,
2009 1,013 568 632 463 254 2,930
Exchange
adjustments (96) (6) (3) - (4) (109)
Additions - 26 61 75 5 167
Disposals - - - - (4) (4)
At June 30, 2009 917 588 690 538 251 2,984

Accumulated
amortisation and
impairment:
At January 1,
2009 5 165 176 250 48 644
Exchange
adjustments - (1) - - (1) (2)
Provided during
the period - 6 15 22 14 57
Disposals - - - - (1) (1)
At June 30, 2009 5 170 191 272 60 698

Net book value
at June 30, 2009 912 418 499 266 191 2,286

Net book value
at December 31,
2008 1,008 403 456 213 206 2,286

8. Borrowings

On February 5, 2009, the Group borrowed £200m from an existing facility.
Interest is payable at 3 month LIBOR + 26.7bp and the loan matures in 2014. On
April 30, 2009, the Group issued £500m 6.75% Notes maturing in 2019. There
were no other significant changes in the Group's borrowings during the six
months ended June 30, 2009.

9. Other financial assets and liabilities

Half-year to June 30, Half-year to June 30, Year to December 31,
2009 2008 2008
Assets Liabilities Net Assets Liabilities Net Assets Liabilities Net
£m £m £m £m £m £m £m £m £m
Foreign
exchange
contracts 596 (680) (84) 348 (103) 245 112 (2,293) (2,181)
Commodity
contracts - (42) (42) 74 - 74 - (89) (89)
596 (722) (126) 422 (103) 319 112 (2,382) (2,270)
Interest
rate
contracts 180 (3) 177 76 (1) 75 278 (4) 274
Financial
RRSPs - (438) (438) - (353) (353) - (455) (455)
B/C Shares - (4) (4) - (22) (22) - - -
776 (1,167) (391) 498 (479) 19 390 (2,841) (2,451)

Foreign exchange and commodity financial instruments

Half-year Year to
to June December
Half-year to June 30, 2009 30, 2008 31, 2008
Foreign
exchange Commodity Total Total Total
£m £m £m £m £m
At January 1 (2,181) (89) (2,270) 418 418
Fair value changes to fair
value hedges (39) - (39) 1 83
Fair value changes to net
investment hedges 6 - 6 - -
Fair value changes to other
derivative contracts 1,909 30 1,939 135 (2,479)
Fair value of contracts
settled 221 17 238 (235) (268)
Fair value of derivative
contracts assumed on formation
of joint venture - - - - (24)
At period end (84) (42) (126) 319 (2,270)

Financial risk and revenue sharing partnerships (financial RRSPs)

Half-year Half-year Year to
to June to June December
30, 2009 30, 2008 31, 2008
£m £m £m
At January *1 (455) (315) (315)
Cash paid to partners 17 12 53
Addition (15) (39) (40)
Exchange adjustments direct to reserves 21 (7) (6)
Financing charge *1 (14) (12) (26)
Excluded from underlying profit: *1
Exchange adjustments 12 5 (118)
Changes in forecast payments (4) 3 (3)
At period end (438) (353) (455)

*1 Total charge included within finance in the income statement is £6m
(2008 half-year £4m, full year £147m).

10. Pensions and other post-retirement benefits

The net post-retirement scheme surplus/deficit as at June 30, 2009 is
calculated on a year to date basis, using the latest valuation as at
December 31, 2008. There have been no significant fluctuations or one-time
events during the six-month period that would require adjustments to the
actuarial assumptions made at December 31, 2008.

The adoption of IFRC 14 has resulted in the recognition of an additional
provision for future minimum funding liabilities. This has increased the
scheme deficits by £400m at June 30, 2009 (2008 half year £467m, full year
£425m). Consequential deferred tax assets of £112m (2008 half year £131m,
full year £119m) have also been recognised.

11. Contingent liabilities

In connection with the sale of its products the Group will, on some occasions,
provide financing support for its customers. The Group's contingent liabilities
relating to financing arrangements are spread over many years and relate to a
number of customers and a broad product portfolio.

During the first half of 2009, there were no material changes to the maximum
gross and net contingent liabilities.

Contingent liabilities exist in respect of guarantees provided by the Group in
the ordinary course of business for product delivery, performance and
reliability. The Group has, in the normal course of business, entered into
arrangements in respect of export finance, performance bonds, countertrade
obligations and minor miscellaneous items. Various Group undertakings are
parties to legal actions and claims which arise in the ordinary course of
business, some of which are for substantial amounts. While the outcome of some
of these matters cannot precisely be foreseen, the directors do not expect any
of these arrangements, legal actions or claims, after allowing for provisions
already made, to result in significant loss to the Group.

12. Related party transactions

Transactions with related parties are shown on page 136 of the Annual report
2008. Significant transactions in the current financial period are as follows:

Half-year Half-year Year to
to June to June December
30, 2009 30, 2008 31, 2008
£m £m £m
Sales of goods and services to joint ventures 1,086 785 1,555
Purchases of goods and services from joint
ventures (890) (688) (1,482)

13. Events after the balance sheet date

On June 29, 2009, the Group announced that it had agreed to purchase a
33 per cent holding in the ordinary shares of ODIM ASA for NOK700m, a leading
provider of specialist marine handling systems to the offshore oil and gas
industry. The agreement was conditional on the approval of the investment by the
Norwegian competition authority. On July 23, 2009, the relevant approval was
obtained and the purchase was completed.

Principal risks and uncertainties

As described on pages 21 to 24 of the Annual report 2008, the Group continues
to be exposed to a number of risks and has an established, structured approach
to identifying, assessing and managing those risks. The Group has a consistent
strategy and long performance cycles and consequently the risks faced by the
Group have not changed significantly over the first six months of 2009.

The principal risks reflect the global growth of the business, and the
competitive and challenging business environment in which it operates. Risks
are considered under four broad headings:

Business environment risks Financial risks
- Cyclical downturn - global - Counterparty credit risk, funding liquidity
recession and credit rating
- External events or factors - Market risks - foreign exchange, interest
affecting air travel rate and commodity
- Environmental impact of products - Sales financing
and operations

Strategic risks Operational risks
- Delivery of aftermarket - Performance of supply chain
- Competitive pressures - IT security
- Export controls - Ethics
- Programme risk

Going concern

After making enquiries, the directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the
foreseeable future. For this reason they continue to adopt the going concern
basis in preparing the financial statements. The financial risk management
objectives and policies of the Company and the exposure of the Company to price
risk, credit risk, liquidity risk and cash flow risk are discussed on pages
60 to 63 of the Annual report 2008.

Statement of directors' responsibilities

The directors confirm that to the best of their knowledge:

- the condensed financial statements have been prepared in accordance with IAS 34
Interim Financial Reporting as adopted by the EU;

- the interim management report includes a fair review of the information
required by:

a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the first six months of the
financial year and their impact on the condensed financial statements; and a
description of the principal risks and uncertainties for the remaining six
months of the year; and

b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.

The directors of Rolls-Royce Group plc at February 11, 2009 are listed in the
Annual report 2008 on page 65. There have been no changes to the directors
since that report.

By order of the Board

Sir John Rose Andrew Shilston
Chief Executive Finance Director
July 29, 2009 July 29, 2009

Independent review report to Rolls-Royce Group plc

Introduction

We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended
30 June 2009 which comprises the condensed consolidated income statement,
the condensed consolidated statement of comprehensive income, the condensed
consolidated balance sheet, the condensed consolidated cash flow statement,
the condensed consolidated statement of changes in equity and the related
explanatory notes. We have read the other information contained in the
half-yearly financial report and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the
condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Disclosure
and Transparency Rules ("the DTR") of the UK's Financial Services Authority
("the UK FSA"). Our review has been undertaken so that we might state to the
company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company for our review work, for
this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the EU. The condensed set of
financial statements included in this half-yearly financial report has been
prepared in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.

Scope of review

We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 Review of Interim Financial Information
Performed by the Independent Auditor of the Entity issued by the Auditing
Practices Board for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK and Ireland) and consequently does
not enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express an
audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2009 is not prepared, in all
material respects, in accordance with IAS 34 as adopted by the EU and the DTR
of the UK FSA.

AJ Sykes
for and on behalf of KPMG Audit Plc
Chartered Accountants, London
29 July 2009

END