Hello, welcome to the Rolls-Royce 2017 full year results Fixed Income call. Throughout this session, all participants will be in listen only mode, afterwards there will be a question and answer session. I'll now hand you over to Stephen Daintith, the chief CFO. Please begin.
Thank you very much. Afternoon, everybody. My name's Stephen Daintith. I'm the Chief Financial Officer of Rolls-Royce. Thank you for joining us this afternoon for a run through of our 2017 results. I'm sure you've read the release already maybe one or two of you actually checked into the analyst presentation this morning, let me just give you one or two highlights then I'll take your questions. I think it's an encouraging set of results that we've presented today. Good operational progress and milestones achieved. If you look at the financial highlights, I think revenues growing at 6% is always a very good start. Profit is up 25% free cash flow has trebled to GBP 273 million, ahead of expectations reflecting the progress that we're making across the group, particularly in Power Systems during the course of the year.
Civil Aerospace delivered a record 483 engines up 35% also achieved a 37% reduction in the cash deficit on the Trent XWB-84, which will be one of our most significant engines over the next few years. Service revenues were strong, which is the aftermarket revenues that grew by 12%, similar to the wide body flying hour growth will be the key driver of improving cash flow as we grow our installed base, great visibility around that cash flow as well reliability of the margins attached to it. You'll also see that we had good transitions this year, a record 67 aircraft versus 46 in 2016. Our aircraft are transitioning better than our competition. A good year in Civil Aerospace. You'll see that we have, however, experienced some issues in Civil Aerospace during the year in respect to the 900 and the 1000.
Essentially, parts not lasting as long as we first anticipated wearing out more quickly. In both instances, the 900 intermediate pressure turbine blade in the 1000 the IPT high pressure blade, also the compressor rotor one and two. A number of issues on the Trent 1000. The cumulative cash cost of those two engine issues in 2017 was GBP 170 million we guided today that's going to double to around GBP 340 million in 2018. I think the encouraging news is that we were still able to give the guidance of GBP 450 million of free cash flow in 2018 despite digesting that GBP 340 million of cash outflow that we're anticipating on those two issues. I think Power Systems had a standout year, growing its revenues nicely, particularly with service revenues growing at 6% their profits growing by over 60%.
Really good profit growth in Power Systems and very good cash conversion as well, converting all their profits into cash and then even working capital contributions as well benefiting Power Systems. Defense had another steady performance. Good margins, albeit slightly declining and operating against some tough export markets and with a slightly dampened U.K. market as well, where certain long-term contracts are starting to come or have come to the end of their lives, including the Tornado, the Typhoon, and the Sea King helicopter. We commented today on the restructuring program that we announced back in January. It's on the capital markets day in June. We're going to tell you a little bit more about that and the progress that we're making there. The theme, though, for the restructuring program is to have a lean corporate center and empowered businesses.
To take some of the heat away from the corporate center activities and then give our businesses a bit more autonomy to decide how to run and operate their businesses, but within a corporate control and governance framework still. We reported our numbers on IFRS 15 as well for the first time for 2017. I think the market's been very well educated along the way as to what the likely impact is going to be. Broadly a GBP 800 million reduction in our profits, and that's almost entirely due to our recognition of the cash losses on original equipment sales in Civil Aerospace immediately, i.e., as soon as the delivery takes place rather than putting the loss on our balance sheet and then amortizing that loss, so to speak, over the life of the contract.
That is, in very simple terms, around a GBP 700 million hit to our income statement, which as you can see makes up the absolute vast majority of the overall impact to our P&L account. We've given some good guidance, I think, some good sort of granular guidance today around our expectations for 2018. In short order, we're looking at GBP 450 million of free cash flow versus today's GBP 273 million for 2017. For profits, we're looking at moving the profit from GBP 321 million of profit under IFRS 15 basis to a GBP 400 million profit in 2018 on that new basis.
Just to point out there that the one key variable that is more tricky to model is the number of shop visits that take place when I've explained how the accounting treatment for the OE cash loss is being recognized immediately, but in the aftermarket, we only recognize the revenues and profits when the shop visit takes place. A key point here is that we collect the cash throughout on a flying hour basis. What you're going to see over the next five, 10 years is a big deferred income balance growing on our balance sheet as we collect the cash, we debit cash and credit the deferred income and put that on the balance sheet. You'll see that liability growing. That's a sort of quick run-through of our numbers. I think an encouraging set of results.
Good to see cash flow growing and moving nicely towards that GBP 1 billion by 2020 goal that we have, so to speak, and again, sort of reaffirming our confidence around that at today's results, and that's notwithstanding the temporary headwind of the 900 and the 1000. We reiterated today the importance of a strong balance sheet and a return to an A grade rating in the near term. That remains an absolute priority for us, and I think we've signaled that intent by indicating that notwithstanding the growth in free cash flow, we're holding the dividend for now and that we will not be revisiting it until 2019. Free cash flow will be the guide for us on the appropriateness of increasing the dividend or not. I think that's a quick run-through.
Sorry for taking a little bit longer on that than you might have hoped. I'm happy to take any questions now that you might have.
Thank you very much. Ladies and gentlemen, if you would like to ask a question, please press zero one on your telephone keypads. You can press zero two at any time to cancel. There will now be a brief pause while questions are being registered. Again, just to remind you, if you would like to ask a question, please press zero one on your telephone keypads. You can press zero two to cancel at any time. A reminder that you do need to have DTMF tones enabled in order to do so. We'll now have a further pause while questions are being registered. It seems we have no questions on the telephone lines at this time. If I could hand the call back to you, Stephen.
Well, thank you very much. I hope there's somebody out there still listening. Thank you very much for your time. I look forward to talking to you at the half year. Thank you. Bye-bye.
This now concludes our call. Thank you for attending. Participants, you may disconnect your lines.