18 November 2024
MELROSE INDUSTRIES PLC
Trading Update
Full year expectations
unchanged
Melrose Industries PLC ("Melrose" or "the
Group") announces the following trading update for the four months
from 1 July 2024 to 31 October 2024 ("the Period"). All
numbers are calculated at constant currency1.
Revenue was up 7%2 on the same
period in 2023, with Engines, up 17%3, showing strong
progress driven by aftermarket revenues, and Structures growing at
1%2,3, impacted by well-publicised OE volume reductions
and previously announced customer destocking. We continue to
partner closely with our major customers to execute efficiently on
production schedules, whilst our internal business improvement
actions progress as planned. As a result,
adjusted4 operating profit continues to grow on the
prior year, in line with our expectations.
End market demand continues to be positive, and
our full year expectations remain unchanged.
Engines
The Engines division's revenue performance
continues to be driven by our aftermarket business, which is up 32%
versus prior year with a particularly strong contribution from
defence. OE volume growth remains constrained by
industry-wide supply chain issues. Looking ahead, the
division is well placed to meet the ongoing industry ramp-up from
its established positions as well as through new
technologies.
Structures
Revenue in Structures, as previously
highlighted, continues to reflect the planned exit of non-core
work, customer destocking and industry-wide supply chain challenges
affecting OE production rates. Defence repricing and
business improvement actions, which are focused on this division,
are coming through as planned. Restructuring programmes are
on track and are nearing completion, which will result in a
significant reduction in associated cash spend in 2025.
Outlook
As we progress through the second half, the
Group's full year expectations are unchanged with
adjusted4 operating profit at £550 million to £570
million5. Net debt4 is also anticipated to
end the year in line with current expectations.
In 2025, despite continued supply chain
challenges, we expect to make strong trading progress and we are on
track to deliver our adjusted4 operating profit target
of £700 million1,5. This performance is expected
to be led by the strong aftermarket performance in our Engines
division offsetting OE volume constraints.
Importantly, the Group expects its cash flow
position to improve significantly next year and to deliver
substantial free cash flow in 2025 (post interest and tax).
The Group's cash flow is poised to grow materially beyond
this as a result of the completion of our restructuring programmes,
the resolution of the GTF powder metal issue, all RRSPs6
generating cash and the continuing growth of the Group's
profits.
The Group will provide longer term financial
targets for the period beyond 2025 at its full year results on 6
March 2025.
Peter Dilnot,
Chief Executive Officer of Melrose said:
"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."
Enquiries:
Investor Relations: Chris Dyett +44 (0) 7974
974690, ir@melroseplc.net
Media: Andrew Porter +44 (0) 207 404
5959, melrose@brunswickgroup.com
1 - Provided at a foreign exchange
rate of USD 1.25: £1
2 - Growth rates are adjusted for
disposals made in the first half of 2024
3 - On a like-for-like basis
adjusting for a transfer of business between divisions
4 - Described in the glossary to the
Melrose Industries PLC Interim Financial Statements and considered
by the Board to be a key measure of performance
5 - Pre-plc costs
6 - Risk and Revenue Sharing
Partnerships. Further details on RRSPs can be found on the Melrose
plc
website.