Melrose Industries PLC on Thursday backed recently increased full-year guidance driven by strong growth in its Engines business.

Birmingham, England-based Melrose is a ’pure-play’ aerospace firm, organised into Engines and Structures divisions from the former GKN business. It spun off its automotive engineering businesses as Dowlais Group PLC last April.

In a first quarter trading update to March 31, Melrose said revenue was up 8% from a year before, with Engines showing strong progress, up 21%, and Structures flat, as expected.

Despite this, shares were marked down 2.0% to 609.23 pence in early trading in London on Thursday.

Ongoing restructuring projects and business improvement actions are progressing well, Melrose said.

‘As a result, adjusted operating profit is up substantially on the prior year, in line with our expectations and recently upgraded guidance,’ it said.

Melrose expects full year adjusted operating profit to increase by 33% to £560 million from the year before. In 2023, adjusted operating profit was £420 million. Melrose had previously increased guidance alongside annual results in March.

Melrose said end markets continue to be ‘positive with strong demand,’ and highlighted ‘increasing’ backlogs in both civil and defence, and favourable Engines aftermarket dynamics.

Chief Executive Peter Dilnot said: ‘We have had a strong start to the year with a particularly good performance from our Engines division. We expect this momentum to continue throughout the year. Longer term, the group is well positioned to deliver ongoing growth and margin expansion supported by positive end markets and excellent business improvement momentum. We are confident about unlocking significant further potential in the years ahead.’

In Engines, Melrose said the strong performance was driven by aftermarket with repair activities growing above the divisional average. Engine volumes continue to increase, albeit they are still constrained by industry-wide supply chain issues. Given the higher profitability of aftermarket, the resulting business mix is generating strong margins, in line with previous guidance, it said.

In Structures, the flat reported revenue, as expected, reflects the planned exit of non-core work and destocking by a major customer as highlighted before.

‘The division is making encouraging progress from business improvement actions, with the majority of benefits expected in the second half and into 2025,’ Melrose remarked.

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