- Full year guidance reiterated
- On target for £700m profit in 2025
- Substantial free cash flow expected
Aerospace components maker Melrose Industries (MRO) defied the malaise in the sector caused by supply shortages after confirming full year- year profit expectations on increased demand for aftermarket parts and services.
Investors welcomed the resilient performance by marking the shares up 7% to a new four month high of 521p, reducing the year-to-date loss to 7% against a 5% gain for the blue-chip FTSE 100 index.
CEO Peter Dilnot commented: ‘It's encouraging that we remain on track to deliver on our full year expectations, despite the industry-wide supply chain challenges.
‘This reflects the strength of our businesses and the balanced position we have with our aftermarket offsetting original equipment headwinds.
‘As we move into 2025, we enter a period of significant and sustained growth in our cash flow for many years ahead. I am confident that Melrose's established capabilities, technology leadership, and unique position on the world's leading aircraft and engines will create substantial value in the future.’
FULL YEAR ON TRACK
For the four months to the end of October revenue was up 7% compared with the same period in 2023 with the engines division growing by 17%, reflecting strong aftermarket demand.
The structures division which continues to be impacted by customer destocking and supply chain challenges, was up 1%.
Despite these challenges Melrose maintained full-year expectations to deliver adjusted operating profit in the range of £550 million to £570 million. The company said it expects to make ‘strong’ trading progress in 2025 and is on track to deliver on its adjusted operating profit target of £700 million.
Importantly, the group expects ‘substantial’ free cash flow generation in the 2025 financial year after interest expenses and tax.
Investment director Russ Mould at AJ Bell commented: ‘There will be genuine relief at a lack of further downgrades at aerospace business Melrose after its warning this summer.
‘Supply chain issues remain in the background amid problems at the world’s two major plane makers Airbus (AIR:EPA) and Boeing (BA:NYSE), yet Melrose has felt able to stick with its current guidance.
‘Next year will be a key test with the company promising a significant increase in cash flow as the bulk of the restructuring of the business concludes.
‘For now, it is the company’s engine division that is really powering things, with the bit of the business which builds the body and wings of planes trailing in its slipstream.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author (Martin Gamble) and the editor (Steven Frazer) own shares in AJ Bell.
LEARN MORE ABOUT MELROSE
