Melrose Industries PLC

Melrose said H1 group revenue grew 10% on a constant currency basis, operating profit rose 16% to GBP 347 million, margin improved by 50 basis points to 18.5%, and EPS increased by over 20% versus last year. Free cash flow was GBP 13 million, up GBP 67 million year on year, and net debt was GBP 1.53 billion, equal to 1.8x net debt to EBITDA. Garden Grove reduced H1 revenue by GBP 16 million and profit by GBP 9 million; excluding it, revenue growth would have been 11% and operating profit growth 19%. For 2026 excluding Garden Grove, management reiterated revenue guidance of GBP 3.75 billion to GBP 3.95 billion, operating profit of GBP 700 million to GBP 750 million, and underlying cash flow of GBP 150 million to GBP 200 million. Ross said H2 Garden Grove exceptional costs are expected to be GBP 25 million to GBP 30 million, and H2 site revenue is expected to run at about 50% of normal, or around GBP 6 million per month of top-line impact. CapEx guidance remains GBP 120 million to GBP 140 million, and the GTF payment was GBP 27 million in H1, in line with full-year guidance of GBP 50 million.

Peter Dilnot framed the half year as proof that Melrose’s aerospace strategy is working, saying demand remains strong in civil and defense and that the company is focused on execution. He highlighted record backlogs, ramping production, strong aftermarket momentum, and growth opportunities in engines additive and defense uncrewed vehicles. His tone was confident but measured, with Garden Grove described as challenging and still uncertain on timing, costs and insurance.

Ross McCluskey emphasized that results were in line with expectations before the Garden Grove impact, with H1 revenue up 10%, operating profit up 16%, margin at 18.5%, and free cash flow positive at GBP 13 million despite a GBP 15 million factoring outflow. He noted H1 Garden Grove costs of GBP 13 million on the P&L and GBP 5 million cash, while H2 exceptional costs are expected to be GBP 25 million to GBP 30 million and are all cash costs. He also said CapEx is expected to accelerate in H2 within the GBP 120 million to GBP 140 million full-year range, leverage stayed at 1.8x EBITDA, and the share buyback has been paused until there is more clarity on Garden Grove. On factoring, he clarified there is no change to the GBP 150 million to GBP 200 million cash guidance or the 2029 cash target; the balance will be capped to revenue growth.

Analysts focused on Garden Grove costs, insurance, buybacks, factoring, and the durability of the 2029 cash flow target. Management said the buyback is being paused, not canceled, because legal, regulatory and compensation outcomes are uncertain, and said the H2 Garden Grove exceptional costs are cash costs that could partly spill into 2027. They also clarified that the factoring guidance is a disclosure clarification rather than a change in plan, and that the 2029 cash target remains intact. On strategy, management said the company is already involved in next-generation engine programs but will decide later whether to participate in RRSPs and at what level.