Well, good morning, everyone. Welcome to the Rolls-Royce Annual General Meeting. I hope you didn't have too much difficulty getting here. I know the traffic has been very difficult around central Bristol. Very pleased to see you all here. My name is Ian Davis, I'm your Chairman, and I'm joined on stage by Warren East, our Chief Executive, Stephen Daintith, our Chief Financial Officer. Members of our board committees, Lewis Booth, Chair of the Audit Committee, Ruth Cairnie, Chair of the Remuneration Committee, Sir Kevin Smith, Chair of our Science and Technology Committee, who's also our Senior Independent Director, and Irene Dorner, a Member of the Safety and Ethics Committee, and our Employee Champion on the board. You'll shortly hear from Warren, who will provide a review of 2018, and then we'll move on to the formal business of the meeting.
First, I'd like to highlight a few key developments. We entered the year with a refined vision and strategy and a determination to improve our efficiency and operating performance. During the year, we embarked upon an ambitious restructuring program and increased the focus of the group by rationalizing our portfolio and simplifying our corporate structure. Your board and management absolutely recognize the need to improve our operational competitiveness and performance. This is an ongoing task, but signs of progress are increasingly clear. After a period of heavy investment, we're focused on generating strong returns and the cash flow that will allow us to compete even more effectively in what continue to be attractive growth markets. During 2018, we took a significant step on this journey.
Our performance has improved significantly from the position in which we found ourselves four years ago, and we further strengthened our balance sheet in 2018. It is sustainable, free cash flow upon which we must base our shareholder payment strategy, and we still have work to do in order to deliver that. It remains our stated objective in the long term to progressively rebuild payments to shareholders to an appropriate level, subject to the cash needs of the business. We did experience setbacks in the year, the most significant of which was the operational issues with our Trent 1000 engine. This has caused pain for us, and even more importantly, for some of our customers. This has been an area of continued and continuing focus and oversight by your board.
I would like to praise the sterling efforts of our engineering and customer support teams in addressing these issues while maintaining our absolute dedication to ensuring product safety, which is, and always must be, our most important priority. You will perhaps be relieved to hear that I do not intend to spend much time on U.K.'s withdrawal from the European Union. Suffice to say that we took steps to prepare for different potential outcomes, with a particular focus on supply chain continuity and retaining essential capabilities. We have continued to brief the U.K. government, other governments, and regulatory agencies on our Brexit-related issues, and your board is regularly updated on our risk mitigation activities. These measures remain in place today as we await clarity on the political situation.
Strategically, we continue to invest in the innovation that will help us realize our goal to be the world's leading industrial technology company. During 2018, we increased our momentum on technologies to protect the competitiveness of our core products on digital technologies to drive productivity across manufacturing, design, and services, and on developing hybrid electric technologies. Hybrid electric and all-electric technologies are becoming increasingly important across all our markets. We have always pursued clean, safe, and competitive solutions to deliver society's vital power needs. With rising prosperity and increased demand for power on one hand, and the impact of emissions on the climate on the other, this task is becoming more and ever more urgent. We have a crucial role to play in creating cleaner, more sustainable, and scalable power for the future.
Our ability to help customers and society with the transition to lower carbon solutions is and will be a critical priority for your board. We also understand that technology in and of itself is no guarantee of success. We must have a high-performing culture with a diverse and ambitious workforce, capable of sustaining our innovation. During the year, significant work was carried out to reinforce the behaviors that we need to foster a work environment where every employee can be at their best. In addition to generating exciting growth and technology options, we must strengthen our culture in order to retain and attract the talent we need for the future. Delivering a long-term impact requires us to have a sustainable business, and that means our commercial organization needs to be as world-leading as our technologies.
Across Rolls-Royce, our immediate focus is on improving our financial and operational performance to generate improved returns. This will give us the sound and credible financial platform we need in order to remain at the cutting edge of innovation in our markets. Our medium-term prospects remain bright and our long-term growth opportunities are truly significant. I'll now hand over to Warren to provide a review of 2018.
Thank you, Ian. Morning, everybody. Thanks very much for coming along, as Ian said. You could be excused for thinking that we're making a bit of a habit of holding the AGM at football grounds. The conference facilities are very convenient. There isn't really a theme here. The reason that we're here this morning is, of course, to underline the importance of Bristol to the Rolls-Royce group. A connection that goes back to 1966, with the acquisition of Bristol Siddeley Company. Of course, you can't come to Bristol without feeling aviation and aerospace back to the early part of the 20th century. I'm told that Sir George White announced his intention to build a factory and build some flying machines, and five months later, a Bristol-designed aircraft took to the skies.
When I was told about that, I thought, "Gosh, we can learn a thing or two about timescales from some of our forebears." Today in Bristol, we have about 3,000 employees and more than half of them, just more than half of them, are associated with our defense business. Really, a lot of our defense business happens out of Bristol. The EJ200 for the Typhoon, the TP400 for the Airbus A400M. The LiftSystem for the vertical takeoff versions of the F-35s. Looking forward, the Team Tempest activity around the new combat aircraft for the U.K., announced at the Farnborough Airshow last year. Well, the team working on that is here in Bristol. It's also responsible in Bristol for our naval activity, in particular, the MT30 gas turbine, which serves for a number of navies around the world.
Actually, if we look at all the support that we do to navies, there are about 70 navies around the world being supported effectively from Bristol. Outside of the defense realm, here in Bristol for our supply chain components and technologies for Civil Aerospace activity, and looking forward, new lightweight components built around carbon fiber composites for really lightweight fan cases and fan blades and the like. Actually, there's a very long heritage and a very long history, but also there's emphasis on looking forward as well, and that's a good proxy for the group. I put up this slide last year at the AGM.
We had redefined our vision and strategy for the future, this really talks about a balance between current products and services, making our operations more efficient, and innovating around new products, services, and technologies for our operations to make us fit for the future and create that leading industrial technology company that Ian spoke about a few moments ago. We began 2018 by talking about restructuring the group and moving from five business units to three, doing things like aligning all of our defense activities into one business, would be an example. Moving from five to three has enabled us to get closer to customers, increase the pace of operation, and really build a foundation to remove the unnecessary duplication which had grown over many, many years in our business. The three interlocking circles there on the slide represent our three businesses.
We're already seeing benefits of this new structure, where the businesses operate within what we call a principle of freedom within a framework. I'm delighted to see that starting to bear fruit now. If I move on, as well as that restructuring, Ian also mentioned the portfolio, the range of our activities. Well, during 2018, we completed the sale of L'Orange fuel injector business, that enables our Power Systems business to focus on growth opportunities now and enables us to allocate capital to core future cleaner technologies. We also announced in 2018 a strategic review of our commercial marine activity. We moved, as a result of that strategic review, some of our marine activities to different parts of the group. The naval marine activity moved to defense. Some of our large naval engine or marine engines moved to our Power Systems business.
That resulted in the sale of the rest of the business, the commercial marine activity. That was completed just last month. There was quite a bit of activity on tidying up of the portfolio. That created a great foundation so that in the middle of last summer, we could announce the restructuring that Ian mentioned. This is a 24-month program of fundamental restructuring, creating a much smaller corporate center, much smaller corporate support functions, reducing layers, removing complexity. Some of that obviously results in reduction of headcount, and that's always a difficult topic and a difficult thing to do. However, we have to think about the future, and we have to think about the future of all of our workforce and all of our customers.
We have to fundamentally change the way we work, creating a simpler business, healthier, more dynamic, with greater productivity, where you can make faster decisions, all those sorts of things. Targeting really an environment where we can realize the benefits of the investments that have been made in the past and seize the opportunities now that we need to seize for the future. One of the big changes that we're trying to make is, I think Ian alluded to, was changes in behavior. So when I talk about the way we work, I don't just mean the structures in the way the business is organized, but actually how people go about their day-to-day jobs. It's been great to see some of those changes starting to happen during 2018.
A great example of that was how the organization responded to the challenges that we faced around the issues that emerged on the Trent 1000 engine. That's the engine that powers the Dreamliner. As Ian mentioned, many of our customers experienced severe disruption as a result of that. There were all sorts of interesting facts and figures, and I went to Japan in September and gave an interview in a magazine article, and I was referring to almost half a million passengers in Japan alone that had been affected or had their journeys affected by the Trent 1000. So this was a big deal, and it's a big deal for our customers and our customer's customers, and we understand that. The good news was the organization responded in a thoroughly constructive, collaborative way. We saw new parts, new service techniques developed.
We quickly increased our capacity to create components. We quickly increased our capacity to do repair and overhaul and deal with and support our customers through that operational disruption. We closed the year with a new design for the compressor blade done and certified, and it's now being fitted into engines and the health of the Rolls-Royce powered Dreamliner fleet is now improving on a day-to-day basis. We haven't got it on this slide, but facts and figures around there, we had between 40 and 50 airplanes on the ground for most of the second half of last year. In the first quarter of this year, to around about now, that number's between 30 and 40.
Actually, it's in the lower 30s at the moment, we expect to be in single digits, which is back into a sort of normal zone for the size of our Trent 1000 fleet by the end of this year. That is how we've dealt with the Trent 1000 issue. Just a quick summary of some of the financial results. We described the year a couple of months ago with our annual results as a year of solid progress, and that's because we don't want to get too excited about it. This revenue growth, top-line growth, was really very strong, driven by good performance in our Civil Aerospace business, with 12% overall revenue growth and our Power Systems business with 15% overall revenue growth.
That good growth in revenue was also reflected in a healthy growth in profitability measures, albeit, I know, off a very small base. That led to a doubling of our free cash flow, which is a good step on the journey to at least GBP 1 billion of free cash flow by 2020 and a GBP per share of free cash flow in the medium term. A good step towards those goals, particularly when you take into account the GBP 430 million that we had to spend on the Trent 1000 issue last year. Delving into some of the numbers in a little bit more detail behind those headline numbers. Our Civil Aerospace business, notwithstanding the Trent 1000 issue, aside from that, actually had a pretty good year. Very strong growth in flying hours. We now have 4,700, well, as of the end of 2018, 4,700 large engines installed.
That's 25% greater than the number five years ago. They're more efficient engines, so airlines tend to use them more, because they're more efficient than some of the older engines, and therefore, these airplanes are flying more hours a day. That helped to drive the 14% growth that you see in flying hours there. Back inside Rolls-Royce, we worked hard on things like reducing the deficit when we supply one of these engines out to our customers. We also saw entry into service of three new engines in February. The more powerful version of the XWB, the XWB-97K, was launched in February. At the end of the year, the Trent 7000 powering the new version of the A330. We saw some important milestones during the year as well. The 84K version of XWB passed 2 million hours. It's now over 3 million hours.
The Trent 700, which powers the earlier version of the A330, passed 50 million hours and is being very successful. Just to show that we haven't forgotten the corporate jet business, we launched the Pearl family in the middle of last year as well, the first of the Pearl engines going on a new aircraft from Bombardier. Obviously, we couldn't talk about that before because corporate jet people like to keep these things quiet until they're absolutely ready to announce them. Moving away from Civil Aerospace, some of you might have traveled either to or from London down the line that comes through Bristol Parkway and will be traveling these days on these new Hitachi trains. They're powered by Rolls-Royce mtu Series 1600 engines.
Very pleased to see those entering into service and actually pioneering some new Long-Term Service Agreements, taking that service business model from our Civil Aerospace business and starting to apply it into other sectors. Our Power Systems business not only did it see strong revenue growth, but also saw strong order growth last year, driven by actually strong markets, indeed, but also increasing market share, particularly in some regions like China, where in order to service the expected demand that we see there, we created a new joint venture. Was launched about 12 months ago. The first engine was produced, and by the time two months ago, I stood up and talked about our results, we had produced over 100 engines out of that facility. If I flick on to Defense, we describe that as a solid year.
It was a particularly strong year in terms of order backlog and order intake, rather, to grow the backlog. We saw orders for more F-35 LiftSystems, more EJ200 engines. We also saw design wins, that will lead to more orders in future with, for instance, the U.S. Navy . We saw some new customers for the multi-role tanker transport, which is powered actually by the Trent 700 engine, which a Civil Aerospace engine, but still in the defense application there. We saw a continued success for the MT30 in naval. MT30, again, coming out of Bristol. That's a quick run around the businesses. I just wanted to talk a little bit about technology investment. I've said before, this is about both current and future. It's very important with a very long-term contract that we continue to invest in technology for current products.
That investment goes into things like optimizing the designs for cost reduction, so that over time we can make more profit out of selling the same things. Importantly, out of improving the in-service performance, longer time on wing. This is key to driving our profitability. You don't get something for nothing in this world. That's the result of investment in technologies for our current businesses. That's things like material science, design tools, production techniques, and so on. It isn't all about current technologies. We also need to keep an eye on the future. Here's a picture of what our new UltraFan demonstrator might look like in a few years' time. This is a very significant architectural change to our gas turbines. First significant architectural change for many decades.
It's going to lead to a step function improvement in efficiency that will result in a big improvement in carbon emissions. It will also achieve a significant improvement in terms of noise and nitrogen oxides, perhaps 50% improvement in nitrogen oxides. The core of the engine, the Advance3 core we tested during 2018. We tested at full power. It's performing brilliantly. Our people who are working on that are delighted with how that's going. We also tested the gearbox, which drives the large lightweight fan at the front of the engine. The gearbox has been run up to about 70,000 horsepower, and testing for that is going well also. At the end of last year, we made an important commercial decision about UltraFan, which we announced in February when we decided not to take part in Boeing's new mid-market aircraft.
That was because we absolutely do not want to do anything that will jeopardize the success of this UltraFan program. We concluded that the timescales for the Boeing project would simply be too aggressive, and we would not have a product mature enough in the timeline of the Boeing project. That's why we withdrew from that opportunity. It doesn't in any way indicate any dent in our appetite for making this an excellent product when it comes to market. However, we have to think also beyond UltraFan, and I've spoken before about electrifications sweeping across the industrial landscape. Electric propulsion is coming to the air as well. We set up a separate capability group in Rolls-Royce because we do need to adjust our skills and position our skill base for the future as well.
We created that electrical group, and by the end of the year, we have three programs targeted at electric flight. We have a partnership activity with Airbus, a hybrid demonstrator aimed at regional transport, so regional type size of aircraft. At Farnborough last year, we announced the concept in eVTOL. That's just to sort of size that's a hybrid concept, and it would take four to five people about 500 miles at about 250 miles an hour. That's the sort of size we're working on there. Thirdly, a local project here, a partnership with a local company, where we are targeting an all-electric flight, very small aircraft, but all-electric flight, and we are hoping to break the world speed record for electric flight with that aircraft. Innovation there for the future in electric flight.
It's not just about flying, although that's quite interesting and sexy, and you can have good pictures about it. Looks quite boring on the bottom right of the slide there. We're also spending a lot of time and effort investing in new materials and production techniques to make things lighter and tolerate higher temperatures and the like to make our engines more efficient. You saw on the video the little robot so that you can send into engines to inspect things. In our Power Systems division, then we're very keen on microgrids where we see great potential for encouraging the faster take-up of renewable power. That's a quick run around the business, quick run around the technologies. Where are we going looking forward? Having stabilized the business, having built some foundations in 2017 and 2018.
You see from what I just presented, we're busy targeting the future, playing our part as the world looks towards a power which doesn't damage the environment so much. We have a key part to play in that. Very much also remembering that there isn't going to be a future, unless we have a healthy, competitive business, with the right skills, where operational excellence is celebrated alongside technical excellence built on diverse talent. It's essential that in the immediate short term, we complete our restructuring program at pace. We start to realize the economic benefits of past investment so that we can seize those opportunities for the future across all markets. Thank you. That's a quick review of 2018.
Okay, thanks, Warren. I hope that gave you all a sense of what we're up to in 2018 and the momentum in the company. I'd now like to start the formal proceedings of this annual general meeting. All shareholders will have received the annual report by post or a notification by post or email that it is available to view on our website. All shareholders will also have received a note of the meeting together with explanatory notes of resolutions being put to the meeting today. This was published on the 25th of March. In line with best practice, a poll will be taken on each of the resolutions set out in the notice. The poll will be administered by our registrar, Computershare Investor Services. Please do not complete your poll voting cards yet.
I'll explain the procedure later in the meeting. I will indicate when you should mark your votes on the cards. I now declare the meeting closed. Sandwiches and light refreshments will be available outside the meeting room in the Heineken Suite. As I said, my fellow directors and I will be joining you. We'll be happy to take any further questions or comments and to chat with you in a more informal setting.