Melrose Industries Stock Earnings Reports

Melrose delivered a strong 2025 with clear progress on its transformation: group revenue rose 8% like-for-like, group operating profit grew 23% to GBP 647m, margins expanded 240bps to 18% and positive free cash flow after interest and tax was GBP 125m. Engines was the primary growth engine (revenue +15%, operating profit GBP 520m, margins ~32%), driven by both OE ramp-up and a robust aftermarket (RSP and repair). Airframes (renamed from Structures) grew 3% with defense up 15% but civil volumes constrained by supply-chain bottlenecks; Airframes operating profit was GBP 156m with margins improving to 8%. Management completed restructuring, reduced site footprint and re‑priced work; net debt ended at GBP 1.4bn (1.8x net debt/EBITDA). Key 2026 guidance (at $1.37/£): revenue GBP 3.75–3.95bn (~10% LFL growth at midpoint), operating profit GBP 700–750m (midpoint margin ~19%), Engines OP GBP 565–595m (margins ~33%), Airframes OP GBP 170–190m (target ~9% margins), and free cash flow after interest & tax GBP 150–200m (midpoint GBP 175m), heavily back‑ended. Management reiterated 2029 targets: GBP 5bn revenue, ~1.2bn operating profit (24%+ margin), and GBP 600m free cash flow, driven by production ramp-ups, growing RSP aftermarket cash and the GTF program becoming cash‑positive in 2028. Capital allocation: continued investment (CapEx rising to ~1.2x depreciation in 2026), dividend growth (2025 total 7.2p, +20%) and a new GBP 175m 12‑month buyback announced to start when the prior GBP 250m program completes. Risks and items to note: ongoing supply‑chain and tariff uncertainty (guidance caveated for new tariffs), the powder‑metal/GTF related cash costs (guidance now GBP ~50m impact in 2026 with total expected within the previously disclosed ~GBP 200m), higher receivables factoring tied to program shipments (no new programs planned), a localized productivity issue at a Netherlands site being remediated, and continued seasonality with cash generation skewed to H2. Management sees M&A only for small, strategic tuck‑ins that accelerate core technology plans (additive fabrication, repairs), but the emphasis remains on organic value creation.