Hello, welcome to today's Rolls-Royce Holdings PLC 2017 half-year result Fixed Income conference call. Throughout this, all participants will be in a listen-only mode. After a brief presentation, there'll be an opportunity for questions. I'll now hand you over to Stephen Daintith, CFO. Please begin, Stephen.
Thank you, Hugh, afternoon, everybody. I'll just spend two or three minutes running through the highlights of the numbers. I'm very happy to take your questions. I think how I would summarize the first half is very much in line with our plans, a very solid performance for the first six months of the year. We are also, at the same time, confirming that our outlook for the year is unchanged. Just as a reminder of that, we have guided to a modest growth in profit in 2017 over 2016, about the same sort of level of free cash flow in 2017 over 2016, which last year was about GBP 100 million. The same thing again this year. That free cash flow is against the backdrop of making more engines than ever.
As you know, we sell our engines to Civil Aerospace at a loss. We're able to offset that drag on the business through improvements elsewhere, which we are very happy with. Looking through the headline numbers, revenue has grown by 6% across the group, half-year on half-year. The two big drivers of that are in Civil Aerospace, which grew very nicely over the year, double-digit revenue growth in Civil Aerospace, Power Systems, which grew by 3% over the half-year over half-year. Nuclear grew by 8%. That number's off a relatively small base. I think it's both Civil Aerospace and Power Systems that are the most pleasing numbers for the first half of the year.
At the same time, gross margin improved quite nicely, a 13% growth in gross margin, driven by growth in Power Systems, as I just went through, also by an improvement in the economics of the Trent XWB engines, which we are reducing the loss on sale, the cash loss on the sale of those engines. We are, again, as we confirmed a couple of days ago, expecting that number to get to a breakeven position by 2020. We almost doubled our profit number to GBP 345 million for the half-year, versus what was GBP 158 million last year. Nice growth in operating profit with the gross margin improvements coming through, also with some good savings in commercial and administration costs of a GBP 38 million saving there year-on-year.
On that note, operating margin increased to 5%, which is an improvement from the first half last year, which was 2.6%. We wouldn't want to pretend at all that we're pleased with a 5% margin, and there's still a long way to go to get to a double-digit margin that we aspire to over the next few years. Free cash flow saw a GBP 75 million improvement year-on-year. Despite the fact that we're making 200 engines in the first half of the year that make a loss of about GBP 1.6 million each, and this time last year, that number was closer to 150, 140. 60 more engines at a loss of GBP 1.6 million, but despite that, we are still generating GBP 75 million more cash. That's despite also spending another GBP 90 million more on CapEx and depreciation if you compare year-on-year.
Good operational cash generation and improvement there, which we are encouraged by. We have decided to keep our dividend flat for the time being at GBP 0.046 per share. We will revisit the dividend when we start to see the growth in free cash flow that we are anticipating. A solid start to the year. No change in the outlook on a full year basis to the one I've just described. We took the opportunity on Tuesday earlier this week to confirm to the market that we're very comfortable with the GBP 1 billion of free cash flow that's being talked about in the market and in the media. We don't have this as a formal target, but it is very much the ambition that we are working towards.
In fact, we would hope to go beyond that as well around 2020 and subsequently, and then grow from there into 2021, 2022. Really acknowledging that this is the cash generation that a GBP 15 billion revenue business ought to have in any event, not just for a nice-to-have goal, but it's almost a financial imperative for us to have this level of free cash flow, given our long-term investments that we often make where we are developing engine programs for engines that may not be on a plane for another 10 or 15 years or so. I would say as a half time update is good progress so far.
Lots to do in the second half of the year, but we are quietly confident around the outlook that we've set the market and ourselves, and we believe that we're well-placed for 2018 and 2019, and moving towards that GBP 1 billion of free cash flow by the end of the decade, which, whilst it's not an internal target, has very much become something that we are looking at as a very useful rallying cry for the organization for where we ought to be as a business. That's my broad overview. I'm happy to take any questions that you might have.
Thank you. Ladies and gentlemen, if you wish to ask a question, could you please press zero and then one on your phone keypad now in order to enter the queue? After I announce you, just ask that question. If you find that question has been answered before it's your turn to speak or wish to retract that question, simply press zero and then two to cancel. There'll be a brief pause while the questions are being registered. Once again, if anyone has a question, please press zero and then one on your phone keypad now. Well, at this stage there seem to be no. Actually, wait one sec. One is now coming through. That's over the line of Philippe Landois of Societe Generale. Please go ahead, your line is open.
Yes, good afternoon. Thank you for taking my question.
Yeah.
Just a quick one on the ITP acquisition. If you could confirm the timing of completion for this deal and your pre-set option to pay for the acquisition. I think Moody's, for example, assumes that you will pay mostly in shares for this transaction. If you could clarify what you intend to do.
Thank you for your question. Completion now is just dependent on the final single approval from the Spanish government, and that we are anticipating that will be before the end of the calendar year. Given that we're now entering the period where it's sort of summer holidays and so on, I would expect that it's probably going to be in the fourth quarter of this calendar year, maybe in September, but the fourth quarter of this calendar year. That's the sort of timing you should be thinking about. As a reminder, the payment phasing for the EUR 720 million transaction will be paid over eight quarters. We have the option of using either equity or cash.
Our choice with each payment will very much depend on the share price and our balance sheet and cash flow and so on, as you might imagine. I would expect that the first payment will probably be in equity just to get the ball rolling on using equity so that we've got that vehicle set up. I think after that, no firm decision is made at this stage. We keep our options open and no firm decisions. We'll start with equity and then take it from there, but very much dependent on where the share price is. Where the share price is now, it's a lot more attractive to use equity than it would have been 12 months ago when we were down to sort of GBP 6 or so a share. At GBP 9.50, using equity becomes far more attractive.
Haven't been too much into that, we'll start with equity and take it from there.
Thank you.
Thank you. One final chance. If anyone has any further questions at this stage, please do press zero and then one on your phone keypad now. There'll be a further pause while any final questions are being registered. Back to you for any closing comments.
Well, thank you for your time, everybody, and I look forward to talking to you shortly after our full year results, which will be in March of 2018. Thank you very much. Bye-bye.
This now concludes today's call. Thank you all very much for attending. You can now disconnect your line.