Image source: © 2025 Krish Capital Pty. Ltd.

Highlights

  • MRO’s adjusted EPS rose 30% to 15.1p, while statutory EPS reached 22.2p in H1 FY25.
  • Free cash outflow reduced by GBP 91 million YoY, reaching GBP 54 million.
  • Adjusted operating margin increased 380 basis points to 18.0% on continued business improvements.

Melrose Industries PLC (LSE:MRO) reported interim results for the six months ended 30 June 2025, highlighting a 30 percent increase in adjusted earnings per share and a material improvement in free cash flow. Adjusted operating profit from continuing operations rose 29 percent to GBP 310 million, lifting the operating margin to 18.0 percent, up from 14.2 percent in the prior period. Statutory operating profit turned positive at GBP 441 million, reversing a loss of GBP 62 million in the previous year, aided in part by gains on foreign exchange derivatives.

Revenue from continuing operations came in at GBP 1,720 million, reflecting 6 percent like-for-like growth. Engines division revenue grew 11 percent to GBP 781 million, while adjusted operating profit in that segment rose 26 percent to GBP 261 million. The division benefited from its risk and revenue sharing partnerships (RRSP), which contributed GBP 182 million in variable consideration during the period. Adjusted operating margin in Engines expanded 400 basis points to 33.4 percent.

The Structures segment delivered 3 percent revenue growth to GBP 939 million, with adjusted operating profit increasing 32 percent to GBP 63 million. Operating margin for Structures improved by 200 basis points to 6.7 percent. Performance in Defence supported the result, while Civil revenue remained flat as anticipated. The company also reported new contract wins with BAE Systems and Lockheed Martin, as well as a deeper engagement with Archer on electric aircraft structures.

Free cash outflow narrowed to GBP 54 million, a GBP 91 million improvement from the previous year, primarily due to higher earnings and reduced restructuring expenses. The company reiterated its full-year free cash flow guidance of over GBP 100 million. Net debt stood at GBP 1,404 million with leverage at 2.0 times EBITDA, following investments in growth and GBP 71 million spent under the ongoing GBP 250 million share buyback program.

An interim dividend of 2.4 pence per share was declared, representing a 20 percent increase. Melrose maintained its full-year guidance on a constant currency basis, adjusting for foreign exchange movement with updated revenue expectations between GBP 3,425 million and GBP 3,575 million and adjusted operating profit forecasted between GBP 620 million and GBP 650 million.

Management confirmed the multi-year transformation program remains on track for completion by year-end, with further benefits expected in 2026.

MRO shares were trading 4.26% higher at GBX 534.00 per share as of 1 August 2025.