Hello, everyone, welcome to Melrose Results for 2025. We appreciate you joining us to reflect on a transformational year and to talk through the exciting path we have for the future. We have lots of value to unlock, especially given strong demand and what we've done over the last few years to reposition our business. The key message today is that we're executing our plan. We've got a clear strategy to create shareholder value, and we're getting on with it. We delivered a strong performance in 2025. There's no doubt that we're operating in a complex and dynamic global environment, and against this backdrop, our operating profit was up, driven particularly by Engines and defense. We also delivered our cash target with positive free cash flow of GBP 125 million, and this represents a really important inflection point in our journey.
Good commercial and operational progress continued to be made. We also completed our multi-year transformation program. This all gives us some very positive growth momentum, which is underpinned by the market, where there's strong demand across both civil and defense. Indeed, in all parts of our business, demand is very definitely on our side. We have established positions on all the world's leading aircraft and their engines. This positions us squarely to benefit from strong future production ramp up and the aftermarket, most notably in Engines. Beyond this, the differentiated GKN technologies that we've prioritized are being actively sought out by leading OEMs. We're nicely on track. We've got a clear path to delivering growth, margin expansion, and increasing cash.
This will deliver ongoing shareholder returns, and on that note, we're pleased to announce today a new share buyback program, reflecting our confidence in hitting the 2029 targets. I'll just say a few words on these two themes covered here, starting with 2025 performance. In 2025, we delivered financially, commercially, and operationally. Sales were up 8%, margins were up 240 basis points, and as I've said already, cash came through positively. On the commercial side, we continued to make good progress, particularly in our target areas, such as winning contracts in our aftermarket blade repair business and the rapidly emerging military uncrewed market. Now, from an operational perspective, we delivered further improvements in safety, quality, and productivity.
I'm going to talk more about this in the second half of the presentation because, clearly, operational execution is important here as we ramp up. Turning now to our positive growth momentum. At the highest level, there are two aspects to this: the strong market and the plan we're executing to unlock our potential. On the market side, our unique Tier One portfolio is embedded on all the world's leading aircraft, so the demand for our products and our technologies is at record levels. We have civil order backlogs going into the 2030s, structural aftermarket demand growth, and the turbulent world is driving an unprecedented increase in defense spending. There's the next generation of aircraft, where our technology is being actively sought out for future developments. Turning to the execution side, the last few years have been about transformation.
We've focused GKN Aerospace on where we can win with design-led positions. We've exited non-core or cash-negative businesses, and we've repriced lots of work where we needed to get sustainable returns. In parallel, we've rationalized our footprint from 50 to around 30 sites. Back in 2023, we were operating at 12% margin, and we were cash flow negative. We've just announced results today with a 600 basis points improvement in margin to 18%, and the cash is nicely positive. Quite some changes, and we now have a great foundation for further gains. Going forwards, it's a different type of growth because the restructuring is complete. Given the expected sales increase, we're going to see operating leverage from the ramp-ups, further productivity improvements from our improved cost base, as well as the gains coming through from our operational and commercial actions.
We are well-positioned, and we know the levers to pull. This gives us confidence in delivering 24%+ operating margin and GBP 600 million of free cash flow by 2029. We'll return to this in the latter part of the presentation, but for now, let me hand over to Matthew to talk in more detail about 2025 performance.
Thanks, Peter. Good morning. It's a pleasure to talk about the business's strong performance in 2025, with profit and free cash flow in line with our expectations. Group revenue grew 8% on a like-for-like basis, led again by the Engines division. Group operating profit took another significant stride forward, growing 23% to GBP 647 million, due to the revenue growth and the further impact of our business improvement programs. Margins also continued to grow, up 240 basis points to 18%. EPS grew significantly, up 25% to GBP 0.321 per share. These are a strong set of results with continued profit growth and a major milestone achieved, delivering positive free cash flow in line with our commitments. Turning to slide seven, breaking this down by division.
Both divisions delivered revenue growth. Our performance continues to be driven by the ongoing strong performance of the Engines business, up 15%. You'll notice that we've changed the name of our structures division to Airframes. Peter is going to explain more about that later on. Airframes saw growth of 3%, with the strong performance of defense constrained as expected by the ongoing supply chain challenges being experienced in the sector, which is holding back civil OEM production rates. Margins continue to grow in each division due to the buoyant engines aftermarket, as well as the benefit of our business improvement programs. Both divisions are making progress towards our 2029 targets. Digging deeper into each division, turning to Engines on slide eight. Revenue growth was robust at 15% up, with both OE and aftermarket contributing almost equally.
OE grew 16%, and this was driven by higher GEnx and GTF volumes and a higher spare engines ratio, as well as good growth in our non-RRSP commercial contracts, including our military ducts business. It was good to see the strong growth for OE in H2. While some of this resulted from the unwind of H1's tariff impact, the underlying OE growth in the second half was still well into the teens. This reflects the volume ramp and bodes well for future OE growth. Turning to aftermarket, this revenue was up 14% in the year. RRSP revenue performed well with growth of 20%, and that revenue included GBP 324 million of variable consideration, which grew by 22%, meaning the core RRSP portfolio grew at 19%.
As expected, due to a strong comparator, our Swedish military business declined 7%. It was good to see, though, a return to growth in the second half, up 7%. We continue to deepen our relationship with the Swedish FMV and have been awarded a contract to develop an uncrewed aerial vehicle demonstrator within 18 months. This business signed an agreement with the FMV to explore the propulsion requirements for future fighter systems. We also signed an agreement to supply several mission-critical components for the Ariane 6 launch vehicle. After a challenging first half caused by tariff disruption, our aftermarket repair business returned to growth of 24% in the second half. Overall, the business grew 12% in the year.
We continued to make good commercial progress in repair, winning a contract with Rolls-Royce to be the sole external supplier of fan blade repairs on three of their engines, and with Boeing for C-17 fan blades. We also entered into a five-year contract extension with Pratt & Whitney for critical fan blade repairs. Operating profit for the division grew by 27% to GBP 520 million, and margins at 31.9% continue to rise. The strong margin reflects the growth in the highly profitable aftermarket business, as well as continuing improvements in productivity and quality in this division. A very strong performance from the Engines division, despite tariff and supply chain challenges, with further growth and improvement to come. Turning to Airframes on slide nine, this division delivered 3% like-for-like revenue growth.
This was driven by Defense, which was up 15%, where increased build rates and improved commercial terms read through in the year. At the half year, we confirmed we had met our target of 85% of the portfolio being sustainably priced, this rose to over 90% by the year-end. Defense continues to develop commercial opportunities, signing an agreement with Anduril Industries to collaborate on next-generation uncrewed aerial vehicle solutions. The partnership with Anduril, which includes advanced composite aerostructures, wiring, a ground-based demonstrator, and advanced flight testing, will initially target the U.K. government's upcoming Land Autonomous Collaborative Platform and the British Army's Project Nyx. Elsewhere, the Defense business has secured two follow-on contracts for C-130J and Typhoon transparencies.
On the civil side of the business, revenue was marginally lower, down 2%, as a result of modest growth in our key narrow-body and wide-body platforms, which are still impacted by continued supply chain issues affecting OEM production rates, offset by declines in business jets and other platforms. Commercially, we signed an agreement with Archer to expand engagement on the Midnight eVTOL platform, which has been selected as the official air taxi provider for the 2028 Los Angeles Olympic Games. Margins for Airframes continued to improve despite the slower ramp-up with the impact of pricing, business improvement, restructuring, and the sale of lower-margin businesses all dropping through. Margin progress, however, was constrained by lower civil volumes, as well as lower productivity at one of our manufacturing sites in the Netherlands. Our plan to resolve this issue during 2026 is already well underway.
Operating profit grew by 10% to GBP 156 million, and margins grew from 7.2%- 8%. Despite the volume and supply chain challenges, the Airframes division continued to deliver profit and margin growth, with more improvement to come when the ramp-up impacts our volumes. Let's now talk about the numbers below operating profit on slide 10. We put the details of adjustments to operating profit in the appendix. From that, you will see that now we've finished our restructuring programs, the size of that adjustment is much reduced. Net financing costs are GBP 132 million, which largely reflects the interest on bank loans with an average cost of 5.3%.
The ETR for the year ended lower than expectations at 20.4%. This was due to the recognition of certain tax assets in Malaysia and Sweden. A combination of all of the above and the steadily reducing share count shows EPS at GBP 0.321, growth of 25%. As a result of the strong performance in the year, a final dividend of GBP 0.48 per share is proposed, increasing the full-year dividend to a total of GBP 0.72 per share, up 20% from last year. This is in line with our capital allocation policy. Now let me turn to our cash performance for 2025 on slide 11. We were pleased that we hit our cash target, delivering positive free cash flow in excess of GBP 100 million.
Free cash flow, post-interest and tax, was GBP 125 million, with GBP 200 million more than last year. Moving into a little more detail, we have split out the movement in variable consideration, continuing to give transparency as to how this affects our results. At GBP 324 million, this was very much in line with guidance. As expected, trade working capital performance in the second half of the year was strong, reflecting the seasonality of the business and the sector, augmented by certain customer settlements, which we expect to continue. For those of you that want it, in the appendices, you will be able to see our factoring position, which ended the year at GBP 396 million. This reflects growth in the existing programs and the ramp-up in the last quarter.
Just to confirm, no new factoring programs have been or will be entered into. With respect to the powder metal issue, we saw GBP 68 million cash costs coming through in 2025, in line with our guidance. CapEx was GBP 94 million and represents 0.9x owned asset depreciation and amortization. This reflects continued investment in strategic growth initiatives, but also that capital expenditure on major restructuring projects was completed last year. I'm pleased to confirm that our restructuring programs have now concluded. From a cash perspective, the cost was GBP 31 million, which is below our guide, and to confirm, there will be no significant cash cost in 2026. Moving on to the share buyback program. During 2025, we returned GBP 173 million to shareholders from the GBP 250 million program announced in 2024.
In the first quarter of 2026, there is a further GBP 60 million to be spent to complete this program. Net debt ended the year at GBP 1.4 billion, and leverage at 1.8x net debt to EBITDA. This was in line with our expectations and our capital allocation policy's leverage target range of 1.5x-2x net debt to EBITDA. Having talked about 2025, let me now give you our guidance for 2026. All of this guidance is given at $1.37 to the pound. First, the P&L on slide 12. Given the expected OE volume ramp-up and the strength of aftermarket in the sector, we expect to see continued robust revenue growth in 2026. This is despite the persistent supply chain challenges that are affecting the whole aerospace industry.
We are guiding to revenue from GBP 3.75 billion-GBP 3.95 billion, which at the midpoint represents like-for-like growth of around 10%. This revenue growth continues to be weighted towards engines. Given the strength of our aftermarket business and our margin improvement plans, we're guiding to operating profit between GBP 700 million and GBP 750 million. At the midpoint, this represents profit growth of around 16%, and the midpoint margin is around 19%. At a divisional level, we expect engines to maintain strong growth rates in double-digit territory, with growth weighted to the aftermarket.
Operating profit guidance is GBP 565 million-GBP 595 million. This includes variable consideration of around GBP 360 million at the midpoint. We expect margins to be around 33%. The Airframes division is expected to show high single-digit revenue growth on a like-for-like basis. This reflects an element of civil ramp-up alongside continued growth in defense. Operating profit is guided at GBP 170 million-GBP 190 million. We expect to hit 9% margins this year through growth and improving Airframes' operating performance. PLC costs are expected to be GBP 35 million this year, including around GBP 3 million of non-cash LTIP cost. I had hoped not to mention tariffs today. Events in the last few days has the potential to cause further disruptions.
We continue to caveat our guidance for any new tariffs, and we wait to see how the recent announcements are actually processed in the U.S. customs system. I can confirm, though, as a result of the swift and firm action on this subject during Q2, tariffs have not had a material impact on our results in 2025. Moving down the P&L for 2026, I expect absolute net interest costs to increase, reflecting the continuation of the share buyback and the fact that the cash generation will continue to be back-end loaded. For 2026, the interest rate for gross bank debt is expected to be around 5.3%. Guidance for ETR is 21%-22%, and this is still very much weighted towards a Swedish tax rate, but will depend on the precise balance of profits during the year.
From a P&L perspective, we're guiding to continued strong growth in the business with top line and operating profit moving forward significantly. Turning to our cash guidance for 2026. We introduced formal cash guidance in 2025, with our commitment to deliver GBP 100 million+ of free cash flow. We now intend to guide a range for cash flow, like our sector peers do. The overall guidance for free cash flow, post-interest and tax, is GBP 150 million-GBP 200 million, which is GBP 175 million at the midpoint, with the range reflecting the size of the group. Let me work through some specific guidance to help your modeling. I've just given P&L guidance, as well as the guide for non-cash variable consideration.
Whilst we are still experiencing supply chain disruption, we would hope that this starts to turn a corner by the end of the year. As such, we do not anticipate significant growth in trade working capital, and we do expect further customer settlements in the year. Resolution of the powder metal issue is expected to have around a GBP 50 million impact in 2026, and we remain confident that the total cost to Melrose of resolving this issue will be within the GBP 200 million advised by Pratt & Whitney at the outset. We expect CapEx for 2026 to be around 1.2x owned asset depreciation and amortization. This is higher than prior years and reflects our commitment to strategic growth initiatives. I'm going to give you more color on this on the next slide.
Whilst historically, we have left you to estimate cash interest, we are now guiding to the 2026 interest cash cost being around GBP 130 million. Cash tax costs will increase in absolute terms in 2026, but will still be low compared to the P&L, around 4% of the adjusted profit before tax. When you combine all of this with the fact that there will be no material restructuring cash costs in 2026, we expect leverage to continue to be below 2x EBITDA within our capital allocation policy. To repeat, free cash flow after interest and tax is guided at GBP 150 million-GBP 200 million, and this cash flow will continue to be heavily weighted to the second half of the year, in line with historic Melrose and sector seasonality.
My final slide 14, reiterates our capital allocation policy. We are now a business that generates positive free cash flow, which will increase each year to our 2029 target of GBP 600 million free cash flow. We will look to allocate that capital in a disciplined manner in three ways. Firstly, we continue to invest in the business, both for maintenance projects as well as investing in business expansion opportunities. In 2025, we invested in our additive fabrication expansion in Sweden and Norway. We also completed our new repair facility in California and set up a new wiring facility in Mexico.
In 2026, investment will grow to 1.2x owned asset depreciation and amortization and will include further investment in additive fabrication and expanded building in one of our U.S. facilities, as well as investment in capacity for the OE ramp up in Engines. From a balance sheet perspective, we intend to be efficient by maintaining leverage at between 1.5x-2x net debt to EBITDA, with a view to attaining investment-grade metrics over time. Provided the first two pillars of our policy are satisfied, we will then look to return cash to shareholders, we'll do this in two ways. Firstly, we will continue to grow our annual ordinary dividend, you've seen that we've announced a final dividend that represents 20% annual growth. We will then make share buybacks, considering free cash flow delivery and leverage targets.
It's worth noting that once the current GBP 250 million program is completed, Melrose will have returned more than GBP 1 billion to shareholders in dividends and buybacks over the last three years. Taking all of this into account, today, we announce a new GBP 175 million, 12-month share buyback program, which will commence once the existing program completes at the end of March. As previously announced, our share buybacks will be considered annually to tie into our year-end reporting process. We believe that our capital allocation policy reflects our intention to invest in the business, a disciplined approach to leverage, and make sensible returns to shareholders. To conclude, the business has performed well in 2025, and despite tariff disruption and supply chain challenges, we expect to deliver robust growth and margin improvement in 2026.
We have passed the inflection point for free cash flow. We will build on that good momentum as we progress towards our 2029 targets. With that, I'll hand back to Peter.
Thanks, Matthew. As you say, let's now talk further about our growth outlook. To start with, I think it's worth just recapping what Melrose is today. We have a unique Tier One portfolio that we've repositioned to deliver value for the future. It starts with two end markets, civil and defense, and serving these markets, we have an Airframes business and an Engines business, both of which play in the OE side and the aftermarket. There's a number of dimensions to our business. In civil engine, we have an RRSP portfolio that gives us an entitlement on 70% of global flying hours, plus an increasing network of parts repairs facilities. In civil Airframes, we have design positions on all the world's major aircraft. We serve Airbus, Boeing, and increasingly COMAC, and we have a good position on leading business jets.
In defense engines, we partner with all engine OEMs as the leader in military ducts, as well as technology on the Pratt & Whitney F135 engine and supporting the Gripen fleet. In defense Airframes, we have embedded positions on all the major rotary and fixed-wing platforms, particularly the F-35, and we're also on key European platforms. It's fair to say we have real breadth in aerospace and defense, and our positions are typically sole source. Against that backdrop, we all know there is strong demand growth, so I won't dwell on this slide. I do want to reinforce on the civil side, we've got record backlogs going out into the 2030s. In the last year, we've seen a big increase in wide-body orders, which is good news for us, given our positions on the A350, the Boeing 787, GEnx, and XWB.
There's also increasing shop visits as flying hours go up. On the defense side, it's clear that there's a generational uplift in NATO spending going forwards, both in Europe and also likely in the U.S. There's this new opportunity with uncrewed aerial vehicles, and our development teams are hard at work here. Suffice to say, demand is strong, reassuring, and underpins our business. I'll turn to each of our businesses in turn, starting with our Engines business, which is unusual because it serves all of the OEMs. At its heart is our RRSP business, and here we provide load-bearing components on all the world's leading engines where such partnerships exist. What this means is every time one of those engines is shipped, then we have a lifetime entitlement to the aftermarket revenue and profit, and of course, that generates significant cash for decades to come.
Our government partnerships business is where, among other things, we support the Gripen fighter jet. We're the provider of aftermarket support globally, of course, this is certainly a growing fleet, as in the last year, again, we've seen more nations buying more planes. We have our repair business, where we have invested and built new, highly automated sites to meet demand in growth areas such as blades, blisks, and disks. It's a purely aftermarket business serving growing global market needs. To round out the portfolio, the commercial contract side, where we have long-term agreements on all the engines that are out there, even when we don't have an RRSP. This effectively gives us some balance, as it's a OE business, giving us exposure to all production ramp-ups.
The final thing I'd say on Engines is we shouldn't lose sight of our breakthrough additive fabrication technology, which is in demand from all the OEMs now and for the future generation. I'll talk more about that shortly. Engines is an exceptional business. Now on to our design-led Airframes business. This is a business that has global reach and also local presence. As Matthew mentioned earlier, you'll notice that we've used the word Airframes here. Historically, we've called this our structures business, but as this slide shows, our technologies and products span beyond structures, including our leading wiring business and also transparencies. On the composite side, we have leadership in terms of design and advanced manufacturing methods. We make major components for aircraft like the Boeing 787, the A350, F-35, and Black Hawk, and we have deep capability through our global design technology centers.
This is an OE business facing significant ramp-up with existing and next-generation aircraft. Turning to EWIS now, we're one of the top three global players in wiring. Here we supply defense aircraft such as the F-35 and a broad fleet of civil aircraft. We have proprietary design capability and a global footprint covering North America, Europe, India, and China. Again, this is in demand with more electrification and higher voltage requirements going forwards. In transparencies, we're effectively the sole high-volume provider of canopies for the F-35 fleet. We make Boeing's passenger cabin windows and have breakthrough technologies to bring forward for the next generation. Finally, metallics, which is a core and differentiated part of the business that's at the heart of the world's high-volume aircraft, such as the A320.
This is a broad portfolio, it's important to reiterate that what differentiates us is the combination of design and cutting-edge production capabilities. Across Engines and Airframes, we have established positions on all the world's leading civil and defense aircraft, and this really is the cornerstone of our strategy. Many of you have seen this slide before, and no apologies for sharing it again, as it's central to the value Melrose will generate in the future. There are three waves to our strategy. First, 90% of the value that we will unlock is delivering growth in the existing platforms from production ramp-ups, RRSPs, engine repairs, and of course, in everything we do, operational excellence. Second, beyond the existing platforms, we've identified target areas very selectively, where our breakthrough proprietary technology is most in demand from our customers and our customers' customers.
Most notably, this is in additive fabrication, military uncrewed aircraft, and advanced air mobility. Thirdly, actively participating in the next generation of aircraft. This includes being the only Engines player to have a position on both current next-generation single-aisle Engines programs, as well as working on the sixth-generation fighters such as GCAP. I'll now talk about our progress in each of these three waves, starting with existing platforms. Aircraft production has clearly been constrained by the supply chain over the last few years, and in some areas, this is still the case. The ramp is coming, given the demand backdrop. There's ongoing and live discussions about what rate will come through and when, but production is going to increase over time.
On civil Airframes, we have a weighting towards wide body and Airbus, and on the Engine side, each new aircraft needs two engines, and we're involved in all of them. On the defense production ramp-up, this is driven by increased spending, and this is evident from the material increases in recent orders that will need to be built with existing fleets, for example, F-35s, Gripens, and Typhoons. NATO's ambition is for these aircraft and new UAVs to be built swiftly, given the threat environment. We, of course, need to make sure we can deliver the ramp, and to start with, our operations are now positioned around technology centers of excellence. We're investing in capacity, automation, robotics, and AI, and we've also got an industrial plan, which we're working on to scale up for defense over the longer term.
The supply chain is gradually easing, production is ramping up, and we're positioned ready to serve our customers. Our next area of growth from existing platforms is the engines aftermarket. Let's start with our RRSP portfolio. It's important to recognize that we do have legacy engine RRSPs generating cash, particularly on programs such as the CFM56 and the V2500. These engines are flying longer, and that benefits us in the short to medium term. As those engines do retire, they're replaced by new engines, in particular the GTF, XWB, and GEnx, where we have an RRSP program share, which is much greater than the legacy engines. As those legacy engines get replaced by newer engines, we're set to benefit on two counts. Firstly, there are more engines flying, and secondly, our program share on those engines is greater.
We have a significant compounding impact with more returns from the engines aftermarket. I should also touch on the importance of the GTF here. Right now, the two GTF variants are the only engines out of our portfolio of 19 RRSPs that are not cash generative. There are still net cash outflows associated with the GTF. These are the PMI inspection program, which is set to complete in 2027, and further investments in the final stages of engine development. The promising GTF Advantage is now starting to come into service, and we expect the overall program to become cash positive for GKN in 2028. This will have a major impact for us, which further compounds the RRSP growth story and its embedded value.
Beyond RRSPs, we have our engine repair capability, where we're building on our legacy position with two new state-of-the-art facilities in California and in Malaysia. Our repair service is very much in demand as older engines are flying longer, and of course, more sophisticated repairs are needed as newer engines take to the skies, often in harsher environments. Now, all of this needs to be delivered in a way that serves our customers well and generates financial returns. To do this, we're increasingly embedding an operational excellence approach, which we call the Three Brilliant Basics. This is centered on lean principles and a continuous improvement model that involves three levers: daily management systems, problem-solving, and breakthroughs. What does this really mean?
If you cut it all the way through, we have key metrics for operational performance, which are cascaded from the shop floor, so literally from Tier One team leaders level, up through every management layer to the boardroom. Each level has measures that it controls, and we strive for improved performance every day. It all adds up. We've been at this for the last couple of years. It's delivered some benefits to date, but there is much more to come, especially now our restructuring is complete. The core measures are SQDIP or safety, quality, delivery, inventory, and productivity. In 2025, we saw further gains in safety, which was 32% better. I'm proud to report this results in 80% less accidents over the last three years. Quality and productivity also both improved in 2025, as this chart shows.
At the same time, we've had some challenges along the way. These include the operational issues at one of our Dutch sites, which Matthew mentioned earlier, and here we're well underway with addressing the root causes, including with our supply chain partners. Our arrears are also not where we want them to be on all programs. With inventory, we've increased our levels, and frankly, we've had to trap some cash in doing that to protect customer delivery. As for the future, our aspirational target is to have zero harm, no escapes, and no overdues. We'll also reduce our inventory carefully over time, and we will drive further productivity gains, including from operating leverage as the ramp comes. We know how this needs to be done. It requires granular and focused work throughout our global enterprise, but we have the toolkit and the operational excellence approach to deliver our potential.
Beyond delivering growth from existing platforms, we're expanding in targeted new opportunities where we're advantaged and we have a right to win. I'll highlight two such ongoing opportunities today. First, additive fabrication. This is a breakthrough technology, which has the potential to replace structural forgings and castings, which continue to constrain engine production rates today. This technology is not a new idea. It's in full serial production on the Fan Case Mount Ring on the GTF. We're not just using established additive manufacturing methods, but instead using our proprietary software and robotics to guide lasers that deposit titanium and alloys into near final form structural components. We have an encouraging pipeline of parts from OEMs and are working to certify them to expand this technology's reach, impact, and value. Beyond the certification, we're industrializing the production process so that we can manufacture at high volume and low cost.
This technology is in demand, not just because it's a smart, efficient, and sustainable way to make parts, but because it can support engine OEMs in a concentrated and challenging supply environment. The second opportunity here is military uncrewed vehicles. This is a new market and an evolving one due to the nature of conflict and ongoing global tensions. We're in demand here, particularly as NATO nations typically want to have their own sovereign capabilities. The development cycles are shorter here, too, and we're working across a range of countries to build new platforms at pace. We've already mentioned a couple of projects in the public domain with the FMV in Sweden and our partnership with Anduril in the U.K. We plan to tell you more about these breakthrough opportunities through investor teach-ins later this year.
Finally, I want to mention, we think it's important to deliver our growth sustainably, and we're taking focused steps to ensure that this is the case. From an environmental perspective, we beat our 2025 targets comfortably, and we're just issuing new ones for 2030. These are aligned with protecting the environment and doing our part in terms of how we're operating the business. From a social perspective, I've already touched on our ongoing safety improvements, and we're also investing in terms of diversity and our people engagement. In governance, we've transitioned our business and our board to reflect our aerospace and defense business model, with a combination of new NEDs and a new chair with deep global A&D experience. As we're growing the business, we're aiming to do so in the right way and with the right team.
As I wrap up here, I want to reiterate our confidence in delivering the 2029 targets. Just to recap on these, top-line growth to GBP 5 billion of revenue, 600 basis points of margin expansion, GBP 1.2 billion of operating profit, and GBP 600 million of free cash flow. Just like other parts of our business, we have momentum on free cash. We've gone from the performance in 2024, which was negative, to a GBP 200 million swing this year. We'll see incremental improvements in 2026, with the guide Matthew has already taken you through, this will then step up further to GBP 600 million in 2029. Let's be clear: We know what the levers are, we also know what the trajectory is here. Essentially, there are 3 core drivers for this step-up.
The first is the growth in EBITDA from the ramp-up that I have just described. The demand is there. We're well positioned to generate more profit, which converts efficiently to cash. The second is increasing cash returns from our extensive RRSP portfolio. Again, we have a locked-in position here, and this is all about the engines going into their shop visits and thus capturing our entitlement as they do so. Finally, and importantly, the GTF, which is set to turn cash positive for us. This is a function of both the completion of the PMI inspection program in 2027, and then the development costs reducing and being more than offset by cash-generative shop visits from the flying GTF fleet in 2028. Simply put, our assumptions are market-based forecast, combining together with our execution to deliver GBP 600 million of free cash flow.
With that, I'll close and return to the message I started with. We know what we need to do, and we're executing our plan. We've delivered strongly in 2025, and we've got great momentum for the future. This gives us confidence about delivering our exciting potential in the years ahead. With that, I'll open to questions.
Thank you. We will now begin the question-and-answer session. If you would like to ask a question today, please do so now by pressing star, followed by one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star, followed by two, to remove yourself from the queue. Our first question today comes from Mark Davies Jones from Stifel. Mark, your line is now open.
Thanks very much. Morning, Peter. Morning, Matthew. I had a few sort of unrelated ones, if I may. Can I just start with GTF? We'd love to talk about that, but can you make any comment on the dispute between Airbus and Pratt at the moment? Is there any risk of financial penalties or additional cost that impacts your free cash flow assumptions around that program? That would be the first one. Should we start on that?
Good morning, Mark. Clearly a very public discussion between Airbus and Pratt & Whitney, and these are both important customers for us. Obviously, Airbus facing strong demand, record backlogs, want to ramp up as much as possible, and therefore demand on the engine side. At the same time, you've got Pratt, who are dealing with a situation which is not only to support the OE side, but also to support the shop visits and make sure that the flying fleet is in good shape. There's a balance there, which Pratt, as the overall owner of that program, is best placed to judge. Clearly, that debate is going on between the OE and the aftermarket side.
We're ready to support our customers on both, and of course, our guidance is very much in line with that. Relative to the cost of any issues, I think relative to the GTF, we're just reiterating the whole PMI costs, and those are very much in line with expectations, and specifically on any dispute between Airbus and Pratt. We think an agreement will be reached, so nothing more to say on that one for now.
Okay. Thank you. Could you give us a bit more detail about what's going on in the facility in the Netherlands and the sort of scale of any impact there in terms of its impact on profitability? The final one was just on the defense outlook, particularly the Swedish business. Obviously, a transitional year in 2025. Would you expect that to be back in good growth in 2026?
Yes. I mean, specifically on the Netherlands side, this is a productivity issue that relates to actually moving production from one facility to another and also some supply chain issues. Those supply chain issues we're dealing with, but they have had also an impact in terms of our first-pass yield. In terms of the impact of that, it's a mid-low single digits, but we believe it's important to call these things out. Critically, the key thing here is that we have taken the steps to rectify this as we, you know, continue to deliver productivity. Amongst the global business, we've moved things around. Most things actually gone very well, and our restructuring program has read through very nicely, in fact, ahead of expectations.
This is just, one particular issue, that we've had to deal with. Contained, we know what we need to do, but we're also straightforward about it being an issue. I think you then asked about.
Thanks for that.
I think.
Swedish defense.
Swedish defense. I think what I'd just step back and talk about defense, as I just have on the presentation, which overall is a rising tide, if you will, for existing fleets. The Swedish opportunity is actually in the new and emerging market of uncrewed aerial vehicles, which is driven, I think, firstly by the nature of war fighting, but also the need and the desire for NATO sovereign countries to have their own capability. In doing that, bringing those things together, uncrewed vehicles can be developed quickly, locally. We're very much at the sophisticated end of this. With the FMV, which is one it's the only project really that's in the public domain.
We're very busy actually, more broadly than the FMV, but with them specifically, it's a demonstrator program, funded by the Swedish government to have an uncrewed vehicle, which would deploy alongside their forces. I think what's really exciting about this for us, is that it builds on our legacy position in terms of composites, and our Airframes business, coupled with our clear leadership, in propulsion with our Engines business. The combination of those two things, meeting a need for customers. We expect this market to continue to grow and to develop. We're very well placed to do that. Again, there's other areas that you've seen, and we've talked about, including here in the U.K., and also some activity in the U.S.
Just to add to that, Mark, I think you saw in the presentation, we're pleased to see that return to growth in the second half. That bodes well for 2026.
Okay. Thank you very much.
Thanks.
Thank you. Our next question comes from Sam Burgess with Goldman Sachs. Sam, please go ahead.
Good morning, both. Thank you for taking the question. First one, just on the structures again, and some of those headwinds you had this year. If you could just help with the level of confidence that you have on that bouncing back and becoming a tailwind to growth maybe through 2026, or is that something that more materializes in 2027? Any visibility there, and, you know, even by customer or program, would be very helpful. Secondly, I saw your trade working capital performance in H2 looked reasonably strong. You referred to certain customer settlements in the report. If you could just give some visibility there, and if that's one-off or recurring, that'd be helpful. Thank you.
Thanks, Sam. Good morning. I'll take the first one, and Matthew, and pick up on the working capital point. Look, on structures, we're reposition this business now so that it's focused in the right areas and with the right operating footprint. The trajectory that we've got on, I think it's worth just stepping back for a moment because we set out with some targets in our 2023 Capital Markets to get significant margin expansion. Indeed, we've over-delivered against the areas of our repricing activity, and also in terms of business improvement. We're up 500 basis points over the last couple of years. It's clearly positive trajectory.
The one area, you're right to pull it out, indeed it's reflected in both our results and our guide, is that the volume isn't quite coming through as we would have hoped back then. It's about 10% lower than we expected because of the supply chain issues. This is clearly well known and flagged by our customers, including Airbus. That's where we are today. I think the important thing leading forward, is our confidence about the margins, because we're up at 8% margins, despite much, much lower volumes. As that volume comes in, it will come in, I mean, the backlog's there, we will see that drop through. We're as confident as ever that we've got the right positions, we're well placed to deliver that ramp up.
The pace of that ramp up, it's clearly guided by our customers themselves, We'll see continued margin progression this year, and that's consistent with the guide that we've given. Beyond that, we absolutely stand by our pathway to get this business to low teens by 2029. Actually, underneath the volume, the other things that we've done, we've actually outperformed to drive this margin expansion. When the volume comes in, and it will, over time, that will read through nicely in terms of our structures business.
To talk about the trade working capital, absolutely, this business will always have a very strong working capital performance in the second half. That's just the seasonality of the business. We talked about this, the half year, that we expected that performance to be stronger, and that's how it's turned out. In terms of customer settlements, we said that there were some customer settlements coming through in 2025. We can't really talk about the details of those. It really reflects sort of conversations and negotiations we have with our customers.
We did say earlier in the year that they would continue, and look, specifically as part of our guide for trade working capital, for 2026, we're expecting a sort of similar level to come through in the working capital and the cashflow.
Really helpful. Thank you both.
Thanks, Sam.
Thank you. Our next question comes from Ian Douglas-Pennant with UBS. Please go ahead, Ian.
Thanks very much. Yes, Ian Douglas-Pennant at UBS. The first is on your receivable factoring, please. That was a lot higher than I was expecting in 2025, that GBP 58 million. What is the pound number that we should expect in 2026? What is contained within your GBP 150 million-GBP 200 million for receivable factoring? That's my first question. The second question is on the buyback. Can you help us understand why are you doing a GBP 175 million buyback? You generated GBP 66 million of free cash flow before factoring in 2025, you've got interest costs of GBP 130 million. Wouldn't that cash be better used to be paying down debt?
Yeah, well, let me take both those, Peter. Firstly, on the factoring, look, let me step back a little bit and sort of talk about factoring. We've been very transparent about the factoring that we do, and these have been in place for many years, historic, with the business, and is very, relates to very specific programs. We've also been very clear that we're not going to enter into any new programs, on the factoring side, and that's exactly what I've confirmed. The reality is, the growth in the factoring relates specifically to the growth in the programs that we have factoring on. I, look, I think I want to be clear that factoring is not driving our cash flow.
I know that's how some people like to put this stuff into their models. What's driving the cash flow is the manufactured product, the shipment of the product, the invoicing of the product, and then we get paid immediately for that through our factoring programs. It's really the operational performance that's driving the cash flow, not the factoring. That's really what I'd say about the factoring. When you look at to next year, we're not gonna guide specifically on the programs. We're not gonna get into that level of detail. We are suggesting that a proxy for the factoring would be, you know, the growth in our revenue, which we're saying is gonna be around 10%.
Now, what we can't do is say specifically, when those programs grow, when the product gets shipped, when the invoices happen. One of the reasons why the factoring at 17% growth is slightly higher than the revenue growth, although it's close to the engines growth, is cause our engines programs have performed really well, and they performed really well in the last quarter. I mean, for me, the good thing to get from this is that we are driving growth in the business, growth in EBITDA, and we're getting paid for that very quickly. In terms of the share buyback, look, it's a good question, I think lots of people have lots of different views on this.
We have a very clear capital allocation policy that says we are gonna grow our cash flow, the source of cash. We're going to invest in the business. You can see that our CapEx is growing in 2026 on our maintenance and our growth initiatives. We're gonna maintain leverage between 1.5x-2x. If those two things are in place, then we will look to return cash to shareholders in a sensible and disciplined way. We have a dividend, and then we have the share buyback that we looked at. I would suggest to you, though, we did deliver GBP 125 million of cash. You can cut it in many different ways.
We delivered GBP 125 million of cash, free cash flow, as we said we would. I think we take that into account, we take the market into account, we take the fact that we've got our aftermarket coming towards us into account when we consider our share buyback decision. That's where we've got to. We are very pleased to announce a GBP 175 million, 12-month share buyback program. you know, we're comfortable with that because it meets our capital allocation policy.
I think the other thing.
Yeah
I might add just to that, Matthew, is I think the share back-buyback is also a sign of confidence. You know, our free cash flow at GBP 125 million this year, GBP 600 million, we're continuing to guide to that and very confident that we can grow into that. Our cash flow is increasing. As a sign of that confidence, we have the ability to demonstrate that aligned with our capital allocation policy, with a continued buyback. It's the policy, and then overlaying that is continued confidence that we know what we're doing. We've got the right demand, the right positions, and we will generate cash, that we have the balance sheet to be able to, and the position to be able to share some of that with our shareholders.
Mm-hmm.
Thank you. The next question comes from Aymeric Poulain from Kepler Cheuvreux. Please go ahead. Your line is now open.
Thank you for taking my question. To follow up on this question on factoring, I mean, for the GBP 600 million 2029 target, should we assume a continued growth up to that point for factoring? Given the current exchange rate, why didn't you revise the exchange rate used for the 2029 free cash flow guidance? That would be my main question.
Shall I take those two first, and then maybe you can add to that if we need to? Yeah, look, Aymeric, on the factoring side, look, we're very clear we have these historic programs in line with the industry. They will grow in line with the programs, and therefore, everything else being equal, and we don't know what exactly is going to be happening in 2029, you would expect the factoring, the balance sheet factoring position to increase. Again, I come back to this point, driven by activity, deliveries, and shipments to customers. In terms of the 2029 targets, you've asked a very specific question about foreign exchange. Look, Peter's been very clear that we've set out our 2029 targets with a very clear set of assumptions and bases beneath that.
You know, we are seeing ahead of us the civil ramp up. We're seeing ahead of us the growth in the aftermarket as it pertains to us and more broadly. We're seeing the GTF turning to cash positive in 2028, and we're seeing the PMI issue being resolved, and we're seeing the end of restructuring of that. Those key assumptions are what drives our GBP 600 million target. Yet you've highlighted there is an element of headwind as it relates to foreign exchange. I don't know what the foreign exchange rate is gonna be in 2029, there are also tailwinds related to that. You know, we talked about defense, we talked about, you know, continuing growth of the aftermarket. From our perspective, we are committed to delivering that GBP 600 million.
We're committed that all the assumptions behind that are still absolutely valid, and if not, sort of slightly better. That's why we're, we keep on driving forward with GBP 600 million. Do you add anything to that, Peter?
I think, I mean, the factoring's come up twice. I'll just make another point from an operational perspective, which is, we're not entering into more programs, as we said. This is really about the timing of receivables. It's just a question of whether or not we get paid directly from a customer or accelerated via those programs, and it's a well-established piece. I think actually guiding to what the factoring balance might be in 2029, frankly, I think is more to do with the timings of shipments in that year. It's not a source of cash to us-
Yeah.
It's just a function of how we operate and run the business, and I think that's really important.
Yeah
-in terms of factoring. It is not a source of cash; it's about the timing of the receivables. Then specifically on 2023, I think you said it very well, the underlying drivers are there. FX will move backwards and forwards, but that being a headwind, there are also some tailwinds that we're not factoring in at this stage, or putting in, should I say, is probably a better use of the word. And that is around potential upside around defense, and also a stronger engine aftermarket. Rather than move that target every time we do a set of results or half-year results, GBP 600 million is the target. You make your own assumptions around FX. We're doing what we need to do to deliver that number, and we'll hit it.
Thank you very much.
Thanks.
Thank you. Our next question comes from Ben Heelan with Bank of America. Ben, please go ahead.
Yeah, morning, guys. I hope you're all well, and thank you for the question. The first question, Peter, back to the slide that you had talking about the growth drivers on cash through to 2029. Is there any kind of ranges that you can give us? What are the biggest drivers? You know, how can we put a little bit more color around some of the building blocks and your guys' confidence to that GBP 600 million? Is the big swing factor the EBITDA growth? Is it the GTF inflection? Could you just give us a little bit more color around that?
Second question, the range that you've given for free cash flow, the GBP 150-GBP 200, could you just give us a little bit of color, what means that you would end at the bottom of that range towards the top of that range? That would be great. Third question, haven't talked about M&A. Is M&A on the agenda? Is that something that you're, you know, thinking about? I remember back at one of the Capital Markets events, you talked a lot about repair, and the potential to grow that business. Is that something that is on the agenda? Thank you.
Great. Should we, should we do the middle one first?
Yeah
just around, 'cause it's closer in 2026?
Yeah, absolutely. Look, we, like everyone in our sector, provide a range of cash flow. And what I can be very clear about is our range is absolutely focused around the midpoint, which is GBP 175 million. When you ask a question, "What can make it 150? What can make it 200?" You know, the vast majority of that range is really around trading, okay? We give a range around our trading profitability, and that obviously largely would flow through to the cash flow. Also, we're a GBP 4 billion multinational aerospace company, aerospace and defense company, that's very, very weighted towards the last quarter of the year, and you see that across the sector.
Is there a possibility that a payment we're expecting of GBP 20 million arrives on the 3rd of January instead of the 29th of January? Yes. That's why we put a range in. What can be absolutely clear is, we are absolutely confident we'll deliver GBP 175 million. There is potential for upside on that, and I think if you look at our track record, we have delivered our cash flow projections for the last three or four years. I think it's really about the midpoint GBP 175 million. Everybody will guide a bit of a range. We're not signaling anything negative around that. That's what everyone will do, but we're absolutely confident we can hit GBP 175 million.
Good. Just stay on the free cash, Ben, and is in terms of the drivers, and as you say, and as I described, there are really three core things here. The first is the growth in EBITDA from the production ramp-up. I think we can see that just steadily increasing, and that will go together with the rates. It's not just, of course, linked to the civil side, but also defense as well. That's gonna be a relatively progressive, straightforward line as we go forward, linked to them. Of course, as that volume comes in, we get a very nice drop through from that as well, as we've already talked. The aftermarket returns.
Of course, what's happening here is, as we've got a new engines being shipped into, and come into, should I say, the aftermarket phase, our share on those engines is greater, and so we're getting a greater proportion of cash returns from the RRSPs. As we know, the aftermarket has been particularly strong. Again, that's contributing through, and as we've seen with the legacy engines, continuing to contribute as well. That's gonna be, again, steady progression. The one that is slightly sort of less linear, if you will, is around the GTF. That is the two parts to that. One is the powder metallurgy issue, which we've guided to again for this year.
It looks like actually, Pratt are actually saying, or RTX are saying, it may drop away completely in 2027. We'll wait and see what they guide, and we'll follow that. That's certainly contained, so it's dropping away this year, potentially to nothing, and it'll certainly drop to nothing by 2027. The swing factor is the GTF going from being a cash absorbing in terms of the development costs that we're, as a program team, putting into that around the GTF Advantage. That actually is then overtaken by the cash generative shop visits, and that inflection point is in 2028. That's important, of course, because it goes from being a cash drag, if you will, to a source of cash.
What we're going to see here, and I mean, I think the first two you can actually model. The second one, obviously, is relatively commercially sensitive around the GTF, but what you can see is it's not a massive hockey stick. We've got continued cash flow progression over the next few years, and then as the GTF kicks in, it'll then move us up to that GBP 600 million mark. Hopefully, that gives you some color as to the, to the drivers, but again, it's going to be progressive from here. Everything that we see sitting here today, you know, more confident than ever around the underlying drivers from this, from a, from a market, from an operational, and from a, from a, from a delivery perspective. That's it on the...
Okay, do you want to add anything?
Yeah. Can I just to be very clear about the powder metal situation, just to talk the absolute numbers. When we talked before, we said that for 2025, it would cost us GBP 70 million, 2026, it would cost us GBP 70 million, and then 2027, we said it would cost about GBP 25 million, and that would get us to the end of the program. What we're seeing now is that we're guiding for 2026, and we're guiding at GBP 50 million. It's GBP 20 million lower than we originally thought, and that's driven by the partners telling us that's what's going to happen. As Peter said, you'll all read the wording in the RTX and the MTU sort of announcements, that they think it will be completed by the end of this year.
The reality is, for us, 'cause we're more of a junior partner, we get sort of the impact of that sort of later than they do. We're still holding on to the potentially GBP 25 million in 2027. We're not asking you to change your models for 2027, it was very positive that by reducing in 2026, it seems to be sort of giving confidence that it's progressing very well.
Good. Ben, your last question was just around M&A. I think what hopefully comes across clearly is that we've got a huge amount of value to unlock here in terms of profitable growth and cash generation from an organic basis. We've repositioned the business, both on the Airframes side and on the engine side, and we're now, you know, well-placed to fulfill that potential and to deliver value organically. That said, anything that is consistent with that, around those areas of opportunity, and particularly around our technology, actually, I would say, if there's an opportunity to tuck in things that will accelerate what we are doing, at a relatively small scale, and actually, it's below the radar, but we have done a software acquisition.
We did it a couple of years ago to support additive fabrication. We're advancing what we're doing in additive fabrication, with advances in sort of forgings and castings, which is, you know, not particularly large scale, but they just reinforce our position here. That's within the range of what we do. We will do those things if it makes sense. Overall, this is an organic growth story. I think the other point I would say is in terms of the shape of the portfolio now, we have, over the last few years, exited businesses that are non-core. We've got a business that's well-placed, and that we see strong demand growth for. From a disposal point of view, we're done on that basis as well.
The core of this is just delivering the promise. Of course, as we do that, the value will come back to our shareholders.
Very clear. Thank you both.
Thank you. The next question comes from Joe Orchard with Rothschild & Co Redburn. Joe, please go ahead.
Good morning. Thank you for taking my questions. A couple, if I may. On Airframes, Airframes structures, the midpoint of your FY 2026 guidance implies a margin of 8.6%, which I think is basically the landing spot that consensus was expecting for this year. Are you still confident that 2029 is the right timeframe where you can get to your low teens margin target for that division? Secondly, a couple of questions on the moving parts for free cash flow. On CapEx, as a step down in H2 versus H1, please could you comment on why that was and whether that's a seasonal trend you expect to continue?
Also, the GBP 28 million generated from the sale and lease back, are there any other facilities in your footprint where you planned on doing this, or was that very much a unique set of circumstances? Thank you very much.
Morning, Joe. I'll get the first one, and then over to Matthew on the cash. Look, I think we sort of touched on this a bit already in terms of where we are on Airframes, which is we've seen very good margin progression from where we were, which is a function of some volume growth and also our business improvement actions reading through. We have clearly continued to increase margins. If you look at the volume that we were expecting, and you would apply that effectively to the performance that we've got, if you put the volume back in at a reasonable drop-through, we would actually be well ahead of our plans. Volume continues to be the constraint here.
What we can see going forwards is that production ramp-up will come. You've seen Airbus guide to the fact that's gone out a little bit in terms of their rate 75, for example, but those targets are absolutely out there, and we're growing into those. As that volume comes through, we're very confident that the margins will as well. Volume is the missing ingredient, if you will, from the story at the moment, but there's no question about demand. It's about satiating that. Again, we're kind of very confident and comfortable with our guidance of low teens for structures over time. I'll just add into there, 'cause we do talk about, you know, Structures, Airframes.
We, we do talk very much focused on the civil side, but we have, of course, got the defense business, which is growing well and outperforming as well. That, again, underpins, if you will, the fact that this is a quality business that will continue to expand its margins and throw off cash. I think hopefully that covers the sort of volume and confidence around the Airframes side. Do you want to do the cash flow?
Yeah, I'll cover the cash flow. On the CapEx side, there's nothing particular around the seasonality there. It's really, in the first half, we did have some sort of carryover from the restructuring that was absolutely finalizing, particularly around the repair facility in California. No, we are absolutely sort of pushing ahead with all the CapEx projects we need to. As you can see, for 2026, we've signaled that we're putting more into that. On the sale and lease back, I mean, they're all kind of unique circumstances, we consider them. With this particular one in Norway, it was a strange one where we actually owned half of it and leased half of it, and then we did the restructuring, so we're not using half of it as well.
We came together with the owner, and we were able to get a sort of a beneficial lease to do that because we've got a reduced footprint. There probably are only a couple of other sites that we might consider that kind of thing from. Look, again, we're saying we're disciplined with capital, and we will be disciplined. There are a couple of other sites that have been affected by restructuring that we might look to either sell or sale and lease back or do something with, it's about sort of utilizing the asset base as best as possible. Thanks, Joe.
Okay, great. Thank you very much.
Thanks.
Thank you. The next question comes from Marie-Ange Riggio with Morgan Stanley. Please go ahead. Your line is now open.
Hi. Thank you for taking my question. I have a couple of questions on free cash flow and some of on additive fabrication. The first one is more clarification on GTF payment linked to Ben question. Can you just help me to understand why we should not assume GBP 45 million impact in 2027 instead of 2025, even if you confirm the total cost of GBP 200 million? That's the first one. The second one is, can you help us to understand how much Engines will contribute to your free cash flow versus Airframes? If not for 2026, if you can give us a bit of color for 2025.
Lastly, on free cash flow, is there any reason to believe that with the new CFO coming in May and probably your softer progress than expected in 2026, that your 2029 guidance can be under review or at least at risk? I will start with free cash flow, and I will go to additive fabrication after. Thanks.
Sure. On the GTF, you know, as I said before, we are sort of led by the main partners on that. What we're saying is it will be within GBP 200 million, and we're trying sort of not to be very specific in writing. As I said, both MTU and RTX have said that the compensation payments will finish during 2026, and have told us that, you know, our contribution in 2026 will be GBP 50 million, which is what we're guiding to. Because of the timing of it, we still think there will be some cost in 2027 to us, and therefore, the GBP 25 million is still valid.
What that means is that overall, the cost will be about GBP 180 from what we know now. That, that's the way that we're guiding you specifically. I'm afraid we don't give cash flow split between Engines and Airframes. All we do say is that Airframes is a, you know, once the restructuring finishes, it becomes a very sort of cash-generative business, normal cash generation, and the non VC elements of Engines are also cash generative. Yeah, sorry, we don't give that split. I'm not gonna comment on the new CFO. Maybe, I don't know if you want to say something.
I think, I, Marie-Ange , let me answer your question two ways. The first thing, I'm gonna take a bit of an issue with you saying our progress is not in line with expectations on cash. I would disagree with you there.
Mm-hmm.
We've delivered against our original target of GBP 100 million, which was at a different FX rate. What we've delivered today is GBP 125. I think that is meeting expectations or perhaps even beating them. We also are guiding towards the range, which is absolutely in line with consensus. I think we're on track with our free cash flow projections from here. That's the first thing. As it relates to 2029, let me be clear, the underlying drivers there, in terms of all the things we just talked about, the production ramp-up, the earnings coming through, the RRSPs, stronger than expected aftermarket, and the GTF, all of those drivers are very much in play and working through as we'd expect.
We're nicely on track on those. We do have some FX headwinds, and you can plug that as you will. We also have, frankly, some tailwinds, which is the defense market is stronger than we expected when we put out those targets into last year. We have the Engines aftermarket, which is quite strong as well. We're not gonna move the target backwards and forwards on FX and these things each time we stand up and do results. What I can tell you is that we're absolutely confident about that GBP 600 million. Ross is gonna be joining us very shortly. He's close to the business already, and we'll get closer, and so don't expect any great movements. We're here with a consistent plan, and it's on track.
Perfect. Very clear. Thank you for that. Just on additive fabrication, you announced last year that it will generate GBP 50 million of operating profit in 2029. I can no longer see it in your presentation, so sorry if I missed it. My first question is that, do you still confirm this contribution? If yes, do you already have a contract signed, giving you confidence on this, and what's the level of margin that we can expect from additive fabrication? Thank you.
Marie-Ange, I'm pleased to talk about this because it's an important part of what we're doing. The first thing is, yes, we're absolutely on track with the GBP 50 million. It is part of the overall path to 2029. Do we have contracts in place? Yes. Are we working with a range of customers on building out the pipeline and the opportunities? Yes, we're talking to all the OEMs across this. We've obviously got some work we're doing with Pratt & Whitney specifically, and I won't go through them. It wouldn't be appropriate to go through, but we're talking to all the OEMs. The reason for this, let me be clear, is what is gating production at the moment across the industry at large, one of the key things is forgings and castings.
This is a breakthrough technology which can replace some of those structurals, forgings, and castings by using our proprietary robotics and lasers to basically print parts in a proprietary way to effectively offset some of the need for forgings and castings. It won't replace the whole GBP 20 billion+ market. Absolutely, it's in demand. It's a good way of making products. The most important thing about it is that it takes some pressure off a very constrained supply environment. It's in demand. Our challenge and our opportunity is to make sure we commercialize it, we bring it in. It's absolutely on track. There is more momentum about additive fabrication than there has been at any stage, partly because, as we see, the market continues to be constrained in terms of engine production.
We commit to the numbers. One of the things we will do is we're going to do an investor teach-in together with this and our defense technology play during the course of 2026.
Just for me, on the level of margin, if I may?
Yes. No, absolutely.
And-
I understand why you're asking about that. Well, I'm not gonna give you a margin, as you'd expect, because that would be inappropriate relative to our customers. What I can tell you, it is not a cost-plus model. We're pricing this as an alternative to other methods, and therefore, you'd expect the margins to be reasonably healthy, but I'm not going to give the margins. We deliberately didn't. The other part is, I would say, is some of it is straight drop-through. In some areas, what we're doing is, instead of buying forgings and castings, what we're doing is we're actually making the material ourselves. If we save the cost there, it's difficult to sort of call what the margin impact is.
It's a GBP 50 million contribution to operating profit in 2029.
Perfect. Thank you very much.
Thank you.
Thank you. There are no further questions at this time. I'll hand back to Peter for closing remarks.
Thanks very much for joining us this morning, and we look forward to talking to many of you in the days ahead. Thanks.