- Earnings back in the black
- Interim dividend raised 20%
- Tariffs mostly mitigated
Aerospace engineering firm Melrose (MRO) posted a return to profit in the six months to June and increased its interim dividend by 20% thanks to strong demand in its end markets.
The shares jumped as much as 40p or nearly 8% to 552p shortly after the open before settling up 28p or 5.5% at 540p.
MAJOR PROGRESS
The Birmingham-based group posted a 5% increase in like-for-like revenue in the first half and a 29% increase in adjusted operating profit, lifting the operating margin from 14.2% to 18% for the period, thanks to its transformation programme.
Moreover, on a headline basis earnings swung from a loss of £105 million to a profit of £379 million and free cash flow improved by £91 million with the firm targeting over £100 million of free cash flow for the full year.
Earnings per share swung from a loss of 6.1p to a profit of 22.2p on a headline basis, and the dividend was increased by 20% to 2.4p per share.
‘Our multi-year transformation programme will be completed by year end and the benefits are already reading through with more to come’, insisted chief executive Peter Dilnot.
‘We have a clear strategy underpinned by attractive aerospace and defence markets, differentiated technology and established positions on the world's leading civil and defence aircraft. We are confident about delivering sustained increases in profit and cash flow in the years ahead and our free cash flow target of £600 million in 2029.’
TARIFFS BEING MANAGED
Melrose’s chief financial offer Matthew Gregory explained to Shares how the firm has moved fast to mitigate most of the impact of Trump’s tariffs.
‘Historically, due to its critical status, the defence industry was exempt from most tariffs, but that has obviously changed and we have worked hard with our customers and suppliers to tackle the issue.
‘The UK’s trade deal with the US has been helpful, as has that with the EU and the existing USMCA (US, Mexico and Canada) accord,’ says Gregory.
‘Some suppliers are liable to pay tariffs and duties anyway, while some of our customers have agreed to bear the increase in costs, and in other cases we’ve been able to manage the impact once workable legislation has been put in place.’
