REG - Melrose Industries - FINAL RESULTS
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RNS Number : 6265U Melrose Industries PLC 27 February 2026
27 February 2026
MELROSE INDUSTRIES PLC
AUDITED RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2025
Strong 2025 performance and positive momentum
Melrose Industries PLC ("Melrose", the "Company" or the "Group"), a
world-leading global aerospace and defence business, today announces its
results for 2025.
Group highlights(1)
• Strong performance with revenue growth of 8% and adjusted operating profit(2)
up 23%
• Adjusted operating margin(2) up 240bps at 18.0%
• Free cash flow generated of £125 million (after interest and tax), a £199
million increase on 2024
• Multi-year transformation programme completed providing excellent foundation
for growth
• Strong commercial progress, including key customer contract wins and new
partnerships
• Quality and productivity gains delivered in a complex operating environment
• New twelve-month share buyback programme of £175 million
• Increase in final dividend to 4.8p taking the full year dividend to 7.2p,
growth of 20%
• Positive momentum to continue in 2026, with Melrose well positioned to deliver
growth in revenue, profit and cash flow towards our 2029 targets
Adjusted(2) results Growth(1) Statutory results
2025 2024 2025 2024
£m £m £m £m
Revenue 3,589 3,468 8% 3,589 3,468
Operating profit/(loss) 647 540 23% 600 (4)
Profit/(loss) before tax 515 438 21% 468 (106)
Diluted earnings per share (p) 32.1 26.4 25% 29.0 (3.7)
Dividend per share (p) 7.2 6.0 20% 7.2 6.0
Free cash flow(2) 125 (74) +£199m n/a n/a
Net debt(2) 1,407 1,321 n/a n/a
Leverage(2) 1.8x 1.9x n/a n/a
Peter Dilnot, Chief Executive Officer of Melrose Industries PLC, today said:
"Melrose delivered another strong performance in 2025. Significant profit
growth was driven by increased Engines and Defence demand, together with the
positive impact of our multi-year transformation programme reading through.
We generated £125 million of free cash flow, representing an inflection point
for the Group, with substantial further increases in cash generation to come.
We have positive momentum and are well-positioned to benefit from expected
production ramp-ups and ongoing aftermarket expansion. We are therefore
confident of further growth in 2026 and achieving our 2029 targets".
Financial highlights(1)
• Revenue of £3,589 million, representing like-for-like ("LFL") growth of 8% on
the prior year
• Adjusted operating profit(2) up 23% at £647 million (2024: £540 million)
• Adjusted diluted EPS(2) up 25% at 32.1 pence compared to 26.4 pence in 2024.
Statutory diluted EPS of 29.0 pence (2024: loss of 3.7 pence)
• Delivery of £125 million of free cash flow(2) (after interest and tax)
• Net debt(2) of £1.4 billion, representing leverage(2) of 1.8x, in line with
our expectations and within our target range of 1.5-2.0x
• Final dividend of 4.8 pence per share proposed, an increase of 20% on the
prior year, with a total dividend of 7.2 pence, up 20% on 2024
Divisional highlights(1)
Engines
• Engines revenue growth of 15% to £1,632 million, with OE and aftermarket up
16% and 14% respectively
• Adjusted operating profit(2) up 27% at £520 million driven by top line
performance with a 300bps improvement in adjusted operating margin(2) to 31.9%
• Adjusted operating profit(2) included £324 million (2024: £274 million) of
variable consideration from RRSP contracts, in line with guidance
• Continued development of additive fabrication capability; 100% serial
production on the Fan Case Mount Ring for the PW1500G and ongoing progress on
further certifications
• Deepened relationship with the Swedish Defence Materiel Administration ("FMV")
on RM16 engine and contract awarded to develop a clean sheet uncrewed aerial
vehicle demonstrator
• Good growth in Engine repairs in the second half and secured a number of
contract wins; San Diego repair facility now fully operational
Airframes
• Structures division renamed Airframes to better reflect portfolio breadth
• Airframes revenue growth of 3% on a LFL basis to £1,957 million
• Strong performance across Defence platforms where revenue grew 15%
• Civil revenue was marginally lower, where we continue to manage production
alongside variability in OE production rates and supply chain challenges
• 10% growth in adjusted operating profit(2) to £156 million
• Adjusted operating margin(2) up 80bps at 8.0% with further progression
constrained by lower civil OE volumes, product mix and lower productivity at
one of our manufacturing sites in the Netherlands
• Defence performing strongly driven by our commercial actions; over 90% of the
portfolio now sustainably priced
• Multi-year contracts signed with BAE Systems for Typhoon and Lockheed Martin
for C-130J
• Agreement with Archer to further expand engagement in the 'Midnight' electric
platform following our capital-light approach to investment
• Partnership signed with Anduril UK to lead future Defence Uncrewed Aerial
Vehicle ("UAV") capabilities
Guidance for 2026 full year(3)
• Revenue range of £3.75 billion to £3.95 billion representing LFL growth of
10% at the mid-point reflecting OE volume ramp-up and the continued strength
of the aftermarket
• Adjusted operating profit(2) of £700 million to £750 million, reflecting an
adjusted operating margin(2) of c.19% at the mid-point
• Our guidance includes variable consideration of between £340 million and
£380 million depending mainly on OE build rates of key engine programmes
• Free cash flow(2) generation range of £150 million to £200 million (after
interest and tax)
• In line with historical and industry seasonality, profit and cash will be
second half weighted
Enquiries:
Investor Relations:
Mat Wootton:
+44 (0) 7483 961 233, mat.wootton@melroseplc.net
(mailto:mat.wootton@melroseplc.net)
Media:
Simon Sporborg, Tom Pigott / Brunswick:
+44 (0) 207 404 5959, melrose@brunswickgroup.com
(mailto:melrose@brunswickgroup.com)
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Audience webcast link
The results will be broadcast from 09.30am UK time today with access via the
following link:
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(https://streamstudio.world-television.com/1006-1475-42844/en)
Conference Call Details - 9.30am, Friday 27 February
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Global Dial-In Numbers
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Access Code: 718239
( )
(Melrose Industries PLC)
(Melrose is an industry-leading global aerospace technology business, listed
in the UK, with more than 30 manufacturing sites across 12 countries. We are
a 'Super-Tier 1' partner to all airframe and engine OEMs, with design-led
solutions on-board 100,000 flights a day, across all of today's high-volume
aircraft. We operate through two market-leading divisions, Engines and
Airframes, across both original equipment and the aftermarket, covering the
civil and defence markets. Every day we deliver flight-critical components
including full engine systems and structures; major airframe components such
as wings and empennages; and full aircraft electrical wiring systems. We
have an excellent track record of delivering value for both customers and
shareholders and have set out an exciting growth plan ahead.)
(Notes)
( )
(1.) (Growth is calculated on a like-for-like basis at constant currency against
2024 results and, for revenue, excludes exited businesses)
(2.) (Described in the glossary to the Preliminary Announcement and considered by
the Board to be a key measure of performance)
(3.) (Assuming US$ = 1.37 average exchange rate)
(4.) (PLC costs are also referred to as corporate costs (see note 3 to the
Preliminary Announcement))
( )
( )
( )
( )
( )
( )
2025 RESULTS
CHIEF EXECUTIVE OFFICER'S REVIEW
OVERVIEW
We are executing our plan with a focused strategy providing a clear path for
significant value creation through the delivery of profitable growth and
accelerating cash generation. We operate in attractive aerospace and defence
markets with excellent fundamentals supported by record order backlogs and a
strong aftermarket. Having repositioned Melrose as a design-led, Super-Tier
1 business with embedded technology on the world's leading aircraft, we are
well placed to benefit from this growing structural demand.
2025 marked the end of an important phase in the Group's development, with the
completion of our multi-year transformation programme, a key component in
delivering operational and commercial excellence across the Group. We have
optimised our global footprint through the exit of non-core businesses and
site consolidations. We have focused our capital investment on capacity
expansion to meet the production ramp-up and continued to invest in our four
global technology centres, ensuring we remain at the forefront of innovation
supporting our customers on next generation platforms. Finally, we have met
our commercial targets, working closely with our customers to ensure our
Defence business and other parts of the product portfolio are sustainably
priced.
With the right foundations now in place, we have transitioned into the next
phase in the Group's evolution, leveraging the repositioned business to
deliver growth, further margin expansion and increased cash flow. This
consists of delivering the OE and aftermarket ramp-up, driving productivity
gains from the sites and ensuring that the commercial actions continue to read
through. We are also focused on unlocking working capital, particularly
through inventory reduction and embedding our 'Brilliant Basics' lean
operating model.
We delivered another strong performance in 2025, our third year as a focused
aerospace and defence company. Operating profit grew by 23% and we improved
cash flow by c.£200 million, generating positive free cash flow of £125
million which is an important milestone for the Group. These strong results
were delivered against the backdrop of additional complexity caused by US
tariffs and ongoing constraints in the supply chain.
While the most significant contributor to future value is profitably capturing
industry growth in OE production and the aftermarket, we are also making good
progress through our ongoing expansion in attractive target opportunities such
as commercialising our breakthrough proprietary additive fabrication
technology and developing uncrewed Defence air vehicles. Beyond these, we
continue to position for the longer term with partnerships working on the next
generation of single aisle engines and airframes, sixth generation fighters,
and electric flight.
Across both civil and defence airframes, we have design-led capability across
a broad range of critical components, including primary wing structures;
empennages; landing gear; anti-icing systems; electrical distribution systems;
and aircraft windows and canopies. To better reflect the breadth and
competitive strengths of this product portfolio, from today we are renaming
the Structures division as Airframes.
We have positive momentum, a clear strategy and excellent growth opportunities
ahead.
WELL-POSITIONED IN STRUCTURAL GROWTH MARKETS
Our revenue streams are broad-based, generating income from: Engines and
Airframes; original equipment and aftermarket; and across both civil aerospace
and defence markets. In 2025, civil aerospace and defence represented 71%
and 29% of Group revenue respectively.
Within civil aerospace, we have content on large, regional and business jets
and hold embedded positions on all leading commercial narrowbody and widebody
aircraft, with a stronger weighting towards Airbus. In Engines, we lead the
industry in the fabrication of advanced engine structures, cases and frames.
We are RRSP partners on 19 different engine families, six of which will
generate 90% of the value of the RRSP portfolio. In Airframes, we have
strong embedded positions with over 70% of our content provided on a
sole-sourced basis.
Within defence, we have airframes and engines content on all of the major
global platforms, both fixed wing and rotorcraft, including the F-35, Gripen,
Apache, Black Hawk, C-130 and Eurofighter.
Defence Aerospace
The most notable development during 2025 across our end markets was in
defence, with global tensions and conflict driving a significant increase in
military spending commitments. In June, NATO members announced a commitment
to increase their defence spending target from 2% of gross domestic product to
3.5%. In Europe, the ReArm Europe Plan aims to mobilise €800 billion
defence spending by 2029, and Security Action for Europe provides €150
billion in potential loans for joint procurement of military equipment. In
the USA, while the defence budget request for 2026 of US$848 billion was flat
on 2025, shortly after the period end, the US President announced a proposal
to increase the defence budget for 2027 by over 50% to US$1.5 trillion.
Alongside this generational shift in defence spending, the nature of
warfighting continues to evolve as demonstrated by the increased use of
uncrewed vehicles. We are well placed to benefit from both of these
long-term trends.
First, growing budgets and higher spending will support continued demand for
key defence platforms such as the F-35 and Gripen where we have established
positions and significant content. Secondly, our differentiated technology
is already creating new business opportunities, and we are actively
participating in a number of new projects, particularly in relation to
uncrewed vehicles, such as the ones announced in 2025 with the Swedish Defence
Materiel Administration ("FMV") in Sweden and Anduril in the UK.
Civil Aerospace
The imposition of US tariffs in April added complexity and uncertainty in
global supply chains. While we were able to largely mitigate the impact of
these new trade restrictions, we saw some impact on deliveries in the second
quarter, the majority of which was recovered in the second half. The UK/US
and EU/US zero tariff agreements reached during 2025 covering civil aerospace
have been welcomed by market participants, providing greater certainty for the
industry. While deliveries of new aircraft increased in 2025, the supply
chain remains fragile and is yet to recover to pre-covid levels, with the
operational environment expected to remain complex and dynamic in 2026.
Despite this, the combination of strong underlying demand for new aircraft and
a supply chain that continues to hold back OE build rates means order backlogs
remain at record levels, stretching well into the 2030s. Pratt &
Whitney's GTF engine family currently has one of the largest order books in
the commercial-aviation market with total orders and commitments exceeding
12,000 engines from over 90 customers. Similarly, order books for new
widebody engines such as GE Aerospace's GEnx that powers the Boeing 787 and
Rolls-Royce's XWB that powers the Airbus A350 continued to grow in 2025.
In 2025, Airbus delivered a total of 793 commercial aircraft, 4% up on 2024,
and in February 2026 announced a target to increase production rates on the
A320 to 70-75 per month by the end of 2027. Boeing substantially increased
its deliveries in the year growing 72% from 348 to 600 and obtained approval
from the FAA to increase its monthly production of the 737MAX to 42 with a
future goal of 47 plus. In the longer term, the substantial backlogs will
support our expected future business growth.
Within our Engines portfolio, we have two RRSPs on Pratt & Whitney's
Geared Turbo Fan ("GTF") engine which powers the A320, A220 and E2. The
inspection programme to resolve powder metal issues on the GTF PW1100G engine
(A320) remains on track with a substantial expansion in planned MRO capacity
expected to increase engines returning to service in 2026. During 2025, the
next generation of the engine, the GTF Advantage, obtained certification from
both the FAA and EASA, with entry into service expected in the second half of
this year.
Growth in air traffic continues to provide favourable conditions in the civil
aftermarket. In 2025, total flight hours increased by 4.8%, and the outlook
remains positive with forecast compound annual growth in total flight hours of
over 6% between 2025 and 2030. Alongside this, the pricing environment in
the aftermarket is expected to remain supportive at least in the short term,
driven by high shop visit demand, low retirement rates of older aircraft and
constrained OE production.
FULL YEAR RESULTS
Group revenue increased 8% on a LFL basis to £3,589 million. This comprised
excellent Engines growth of 15% and Airframes growth of 3%. In Airframes, we
saw a strong performance from Defence which was partially offset by Civil,
where OEM build rates continue to constrain growth. The translational impact
of major currencies within the Group against Sterling was to reduce revenue
and adjusted operating profit by £59 million and £19 million respectively
versus the comparative period.
Adjusted operating profit grew strongly by 23% to £647 million, with margins
up 240bps to 18.0% driven by sales growth and business and operational
improvements. We generated £125 million of free cash flow which represents
a key inflection point for the Group. Our net debt position was in line with
our expectations at £1,407 million, representing a leverage ratio of 1.8x,
after funding growth, the finalisation of our business transformation
programme and share buybacks.
FULL YEAR HIGHLIGHTS
Melrose is a 'Super-Tier 1' partner with design-led solutions deeply embedded
in our customers' aircraft and engines, often for the life of the programme.
During the year, we made good progress in all areas of our growth strategy.
Engines
In Engines, we were awarded a contract by the FMV to develop a clean sheet
uncrewed aerial vehicle demonstrator. The contract combines our leading
structures and propulsion technologies from Sweden, the Netherlands and the
UK, advancing system-level capabilities in uncrewed aviation. This strategic
initiative builds on our long-standing partnership with FMV and the Swedish
Air Force and reinforces its role as the licenced original equipment
manufacturer of the RM12 engine powering the Saab Gripen fighter aircraft.
We continued to make excellent progress with our breakthrough proprietary
additive fabrication technology, where we strengthened our position with the
announcement of a new dedicated production line at our Newington, Connecticut
facility, as well as bolstering production capability in Kongsberg, Norway,
and in Trollhättan, Sweden. This additional capacity will support the
full‑rate production of our breakthrough Fan Case Mount Ring ("FCMR") on the
PW1500G engine, as well as enabling production of new additive components for
our customers.
In engine repairs, we had a number of contract wins and extensions for fan
blade repairs with key customers including Rolls Royce, Pratt & Whitney
and Boeing. Our San Diego repairs facility, which opened at the end of 2024,
became fully operational. This expansion effectively doubles repairs
capacity in the region. Equipped with the latest automation and robotics,
the facility enhances product reliability, boosts efficiency, and reduces
turnaround times for our global partners.
Airframes
In Defence, we signed multi-year continuation contracts with Lockheed Martin
for C-130J nacelles and BAE Systems for Typhoon canopies. We also signed a
new MoU with Airbus Helicopters, strengthening the long-term relationship
between Airbus, GKN Aerospace and Dutch industry in defence. At the end of
the year, we announced a collaboration with Anduril on next-generation
uncrewed aerial vehicle solutions targeting the UK Government's Land
Autonomous Collaborative Platform contract and the British Army's Project
NYX.
Our Garden Grove facility in the USA achieved a number of production
milestones, as well as moving the project to double F-35 canopy production
into the execution phase, with additional capacity expected to come on stream
in 2027. As announced at the half year, as a result of the work done by our
commercial teams, we reached our goal of having 85% of our defence portfolio
sustainably priced some six months ahead of schedule.
In June, we announced our collaboration with Archer on the manufacture and
supply of key airframe components for the production ramp-up phase of the
Midnight aircraft programme, with production taking place at our sites in the
UK. This expands the scope of our existing relationship, which has focused
on supplying Midnight's low voltage Electrical Wiring Interconnection
Systems.
Operational highlights
Across the Group we made significant operational gains in 2025, reinforcing
safety and quality as top priorities. On safety, our Total Injury Rate
("TIR") was 32% lower at 4.16 (2024: 6.15), while the cost of poor quality
("COPQ") improved by 19%. Quality improvements not only strengthened
customer relationships but also drove a number of efficiency savings versus
the comparative period. We also delivered further improvements in
productivity which increased by three percentage points. These gains reflect
the traction we are seeing with our lean operating model, 'Brilliant Basics',
which is building a stronger culture of continuous improvement throughout the
Group.
While this is encouraging, we have not yet been successful in reducing our
inventory levels across the Group which remain high. While continuing
volatility in OE demand has been a factor here, reducing inventory levels and
unlocking working capital will remain a key focus area across the Group where
we are deploying our 'Brilliant Basics' tools.
DIFFERENTIATED TECHNOLOGY
During 2025, we continued to apply our product design leadership capabilities
to guide the development of our differentiated technologies aimed at improving
the efficiency of our customers' aircraft and engines, as well as improving
our efficiency in energy and material utilisation. Our solutions for both the
civil and defence markets provide reductions in weight and improvements in
performance critical to enabling the introduction of new aircraft concepts as
well as the step change required to launch the next generation of major
aircraft and engines.
Our additive fabrication technologies continue to progress, following the
successful certification and industrialisation of the world's first major
structural component, the Fan Case Mount Ring component of the GTF PW1500G
engine for Pratt & Whitney. This two metre diameter engine structure has
already achieved a 40% material waste reduction per part compared to
traditional manufacturing methods, with further opportunities identified. This
marks the first of many planned technology insertions being developed with
Pratt & Whitney, GE Aerospace and Rolls-Royce, as we combine our design
leadership role with world leading additive capabilities.
Composite structures also remain a key priority for our business, with
material and process developments focused on minimising weight whilst also
enabling significant improvements in manufacturing efficiency, rate and cost.
Following successful completion of major collaborative programmes such as
ASCEND and Airbus' Wing of Tomorrow programme, we have launched a new R&D
consortium (ASPIRE) aimed at greater structural optimisation on the next
generation of composite wing structures and have further programmes targeting
both airframe and engine structures due to launch in 2026.
Electrification of aircraft and propulsion systems offer an important
opportunity to reduce aviation's inflight emissions. Building on our
established Electrical Wiring and Interconnect System ("EWIS") business, we
have been exploring higher power electrical solutions, supporting our advanced
air mobility customers as well as cutting edge technology collaborations such
as the EU-supported SWITCH consortium project in which we delivered the first
high voltage electrical wire harnesses to advance hybrid-electric aircraft.
Our hydrogen propulsion portfolio was rationalised to focus on the area of
greatest impact and importance to our customer, electrical power distribution.
Building on our learning from the H2Gear programme planned to complete in
2026, we launched the H2FLyGHT programme in the UK and the connected Airbus
led 'ICEFLIGHT' programme in the Netherlands.
In our aftermarket services, the extension of our repairs contract with Pratt
& Whitney, demonstrates our continued commitment to improving aircraft
life cycle and circularity. We also expanded our repair technology portfolio,
building on our additive fabrication technologies to enhance efficiency and
repairability of engine structures.
Having delivered on our 2025 climate-related sustainability targets, we have
now set updated targets to 2030, which continue to focus on enabling
aviation's route to Net Zero, reducing our emissions as a business and
reducing our consumption of natural resources.
CAPITAL ALLOCATION
The delivery of our free cash flow target in 2025 represents the start of a
sustained period of cash generation for the Group, with our leading positions
and positive momentum providing confidence that we will deliver a significant
increase in cash flow for many years ahead.
Against this backdrop, we have a clear capital allocation framework.
Our first priority is to invest in the business to drive organic growth
through capacity expansions and automation to deliver the Civil and Defence
ramp up and targeted expansion opportunities. In Engines, we are deploying
capital in our unique additive fabrication technology. In Airframes, we are
taking a more selective approach including customer funding where possible.
Our second priority is our commitment to grow the ordinary dividend and
finally, we will look to return excess capital to shareholders through share
buybacks.
Alongside these priorities, we will maintain a strong balance sheet with a
target leverage ratio of between 1.5x to 2.0x, with investment grade metrics
being targeted over time.
The Board has declared a final dividend for 2025 of 4.8 pence per share which
will be paid on 5 May 2026 to shareholders on the register at the close of
business on 20 March 2026. This takes the total annual dividend to 7.2 pence
per share, representing growth of 20%.
At the end of 2025, we had completed £192 million of our £250 million
18-month share buyback programme and remain on track to complete the remainder
by the end of March 2026. Today we are announcing a new share buyback
programme of £175 million to be completed by the end of March 2027.
BOARD CHANGES
Our Board continued to evolve during the year to align with our strategy as a
long-term aerospace and defence technology business, with a number of new
appointments.
Further to his appointment as Non-executive Director and Chair designate on 1
October 2024, on 30 March 2025 Chris Grigg took over as Chair of the Board.
Chris is an experienced FTSE 100 executive and non-executive, including in the
aerospace and defence sector as former Senior Independent Director of BAE
Systems PLC.
In May 2025, Alison Goligher was appointed to the Board as Non-executive
Director and Chair of the Remuneration Committee, becoming Senior Independent
Director in October. Alison was previously Non-executive Director at Meggitt
PLC, the leading global aerospace and defence business.
In August 2025, Guy Hachey joined the Board as Non-executive Director. Guy
served as President and Chief Operating Officer at Bombardier Aerospace, Inc.
from 2008 until 2014, and is currently a non-executive on the board of Hexcel
Corporation.
On 26 January 2026, we announced the appointment of Mary Petryszyn as
Non-executive Director. Mary is a seasoned aerospace and defence industry
leader with over 30 years of senior executive experience in defence systems
technologies, operations, and profit and loss management. Between 2013 and
2023, Mary held a number of senior roles at Northrop Grumman, most recently as
Corporate Vice President and President of Defence Systems.
In December 2025, we announced that Matthew Gregory, Chief Financial Officer,
will retire from his position in 2026 and be succeeded by Ross McCluskey, who
is currently Executive Vice President, EMEA and Government and Trade Services
at Intertek Group plc. Ross, who will join Melrose on 5 May 2026. He
previously served as Group Chief Financial Officer of Intertek plc and prior
to that, held a number of senior finance roles at Inchcape plc.
OUTLOOK
Melrose is focused on design-led technology where we have established
proprietary or market-leading positions on the world's leading aircraft.
With structural demand from record order backlogs and increasing aftermarket
requirements set to continue, we are well placed to deliver further profitable
growth and increased cash generation in 2026 and the years ahead.
For 2026, we expect to deliver another year of growth in sales, operating
profit and free cash flow.
As usual we expect cash generation will be second half weighted. Our 2026
guidance assumes an average exchange rate of GBP £ = US$1.37 and does not
factor any impact from any new trade restrictions or tariffs.
Income Statement Updated (million)
Revenue:
Engines £1,700 - £1,800
Airframes £2,050 - £2,150
Group £3,750 - £3,950
Adjusted operating profit
Engines £565 - £595
Airframes £170 - £190
PLC costs c.£35
Group £700 - £750
Free cash flow £150 - £200
Last year we announced a series of five-year targets for the Group out to
2029: £5 billion of revenue, £1.2+ billion of adjusted operating profit and
£600 million of free cash flow (stated at GBP £ = US$1.25). With strong
momentum across the Group, we have a clear path to delivering these targets
based on the expected ramp up in production rates to publicised levels and our
positive trajectory. We are excited about the future prospects for Melrose
and focused on delivering value for the benefit of all stakeholders in the
years ahead.
Peter Dilnot
Chief Executive Officer
27 February 2026
DIVISIONAL REVIEW
ENGINES
2025 2024 Growth(1)
Engines adjusted results £m £m
Revenue 1,632 1,459 15%
Operating profit 520 422 27%
Operating profit margin 31.9% 28.9% 300bps
Our industry-leading Engines division is a trusted technology partner to all
global engine manufacturers, with differentiated products helping power around
90% of the world's major aircraft. It has significant diversification, across
both civil and defence and original equipment ("OE") and aftermarket. Its
technology leadership, especially in additive fabrication, has earned it a
unique position on both next-generation engine development programmes.
Engines' revenue is well balanced across four core business models: long-term
risk and revenue sharing partnerships ("RRSPs"); non-RRSP commercial
contracts; repair; and government partnerships.
The Engines division delivered excellent results in 2025 with revenue growth
of 15% on a LFL basis to £1,632 million supported by favourable end market
dynamics, with growth in OE and the aftermarket of 16% and 14%,
respectively.
In OE, revenue from our RRSP portfolio grew 19%, driven by the ramp-up in new
engine deliveries for both narrowbody and widebody aircraft, and a favourable
mix impact from spare engine sales. We also saw good growth in non-RRSP
commercial contracts including our military ducts business.
In the aftermarket, we saw strong revenue growth across our RRSP portfolio of
19%, primarily driven by the newer engines in service. After a flat first
half, where the uncertainty created by US tariffs softened demand, our engine
repairs business recovered strongly in the second half to deliver double-digit
revenue growth for the full year driven by increasing shop visits and demand
for spare parts. As expected, revenue in our governmental business was lower
than the very strong 2024 comparator, although this part of the business also
returned to growth in the second half. Variable consideration of £324
million was in line with our guidance, reflecting the ramp-up in new platforms
powered by the GTF, XWB and GEnx engines.
Adjusted operating profit increased by 27% to £520 million, up from £422
million in the prior year.
This resulted in an adjusted operating margin of 31.9%, 300bps above 2024 and
in line with our guidance. The impact of foreign exchange translation was to
reduce revenue and operating profit by £51 million and £17 million
respectively compared to 2024.
Pratt & Whitney's GTF Fleet Management Program ("FMP") on the PW1100G
engine remains on track. The addition of substantial new shop visit capacity
by global maintenance repair and overhaul ("MRO") partners is expected to
accelerate progress on the FMP over the next two years. We continue to
expect the total cash cost associated with the powder metal issue to be within
the c.£200 million previously announced, with 2026 costs expected to be
c.£50 million. The GTF Advantage was certified by both the FAA and EASA in
2025 and is expected to enter into service this year. This new variant of
the GTF provides a number of benefits including additional thrust, better
performance at short-field runways, improved payload and range and lower
operating temperatures.
The Engines division made significant commercial progress in 2025. In engine
repairs, we agreed a new contract with Rolls-Royce to be the sole external
provider of fan blade repairs on the RB211-535, Trent 700 and Trent 800
engines. We agreed a five-year contract extension with Pratt & Whitney
for critical fan blade repairs and also signed a new contract with Boeing for
C-17 fan blades. Our new, state-of-the-art facility in San Diego increases
engine repair capacity in the region, providing advanced repair solutions for
both current and next generation engine components, including GE LEAP and
Pratt & Whitney GTF models, alongside legacy platforms. Equipped with the
latest automation and robotics, it will boost efficiency and reduce turnaround
times for our global partners.
In defence, we continued to deepen our relationship with the FMV, including an
agreement for us to become the type certificate holder for the RM16 engine at
the heart of the latest generation of Gripen jets, the E-series. Once
formalised, in 2026, this certification will maintain our support for Gripen
engines for decades to come. We were also awarded a contract by the FMV to
develop a clean sheet uncrewed aerial vehicle ("UAV") demonstrator, including
a dedicated turbojet engine, within 18 months. With a contract value of
c.£12 million, the project will combine our leading airframe and propulsion
technologies from Sweden, the Netherlands and the UK, advancing system-level
capabilities in uncrewed aviation and strengthens our position as a trusted
partner in Sweden's national defence ecosystem. In 2025, following the
successful completion of concept studies for future air combat propulsion
systems, we were awarded a contract to explore and recommend options for
Sweden's next generation of air combat systems.
Operationally, 2025 was another year of good progress for Engines. Safety is
our top priority, and we continue to maintain a strong track record in this
area with one lost time accident recorded in 2025, which was the same as 2024.
The deployment of our lean operating model, 'Brilliant Basics', is
generating a number of benefits and efficiency savings and is helping embed a
strong focus on quality and productivity, with the division delivering a
five-percentage point improvement in productivity and a 35% improvement in the
COPQ.
We are also applying differentiated technology to enhance our operational
performance. In 2025, we made progress implementing Automated Visual
Inspection Technology using AI and machine-vision systems for critical engine
components. This significantly cuts inspection time, reduces the risk of
missed defects and ensures the highest level of component safety. We are
also developing fully automated technology for repairing fan blades used in
commercial aircraft engines using robotics, advanced scanning, and intelligent
process control to restore damaged blades with high precision and
consistency. This breakthrough will significantly improve repair turnaround
time and quality, helping airlines maximise aircraft in service for a longer
period and time on wing at a lower cost.
It has been another important year of progress for our proprietary, additive
fabrication technology, where we strengthened our position as the industry
leader. In 2025, we announced the expansion of production capability at our
sites in Norway and Sweden, and announced plans for a new line at our
Newington, Connecticut facility. This will support further production growth
of our FCMR and new additive components for our global customers.
The FCMR is a key component for the Pratt & Whitney GTF engine. The two
metre diameter titanium structure is the largest additive component to achieve
FAA certification and is the only load-bearing additive engine structure
flying today. In 2025 it reached serial production, moving from 100
fabricated cases per year to 300. We also made progress with GE Aerospace
applying additive fabrication on key insertion activities on the GEnx and GE9x
including the production of a full-size demonstrator. Additive fabrication
is already helping to reduce lead times, material waste and emissions in
manufacture, and importantly, helping to strengthen supply chains.
Looking further ahead, Engines is a strategic partner on both future engine
development programmes: the CFMI RISE and Pratt & Whitney's next
generation GTF. Our work is focused on designing high performing load
bearing structures utilising our additive fabrication capabilities. In 2025,
we were successful in delivering our largest ever all-additive component: a
large-scale, titanium engine case for the CFMI RISE technology demonstrator.
Produced using fully automated direct energy deposition, the structure met
casting-quality standards and demonstrated the full design and build potential
of large-scale additive fabrication.
OUTLOOK
Our Engines division is well placed for continued growth, margin expansion and
increasing cash flow. The division has an enviable combination of
OEM‑level capability, proprietary technology positions, strategic
partnerships with all major engine OEMs, and the most diverse RRSP portfolio
in the industry. This provides the foundation for significant value creation
in the years ahead.
In 2026, we expect the division to deliver revenue of £1,700 to £1,800
million and adjusted operating profit of £565 to £595 million (using an
exchange rate of 1 GBP = US$1.37). In line with historical phasing, Engines
margins are expected to be higher in the first half.
Our medium-term targets for the division out to 2029 are to deliver annual
revenue growth of high single digits CAGR with an adjusted operating margin in
the mid-to-high 30s percent.
AIRFRAMES
2025 2024 Growth(1)
Airframes adjusted results £m £m
Revenue 1,957 2,009 3%
Operating profit 156 144 10%
Operating profit margin 8.0% 7.2% 80bps
Our Airframes division is a Super-Tier 1 design-to-build partner on the
world's most successful and highest volume civil and military aircraft.
Through differentiated technology we are well positioned as partner of
choice for next generation and emerging platforms. With strong underlying
dynamics in both the civil and defence markets, our focus is on delivering
production ramp-ups and driving margin expansion, quality of earnings and
strong cash flow. The end market outlook remains very positive, underpinned
by record backlog levels for new aircraft and the increase in global defence
spending. Divisional revenue derived from civil and defence platforms in
2025 was 65% and 35% respectively.
While demand fundamentals are robust, during the year the division faced
disruption caused by OE production rate variability, plus increased supply
chain complexity following the imposition of US tariffs in the first half.
Throughout the period, the business has worked closely with its customers
and partners to mitigate the impact of these challenges with a focus on strong
execution and meeting our commitments on delivery and quality.
While deliveries by the major OEMs increased in 2025, the overall operating
environment is expected to remain complex in 2026 as strong demand continues
to place pressure on what continues to be a fragile supply chain.
Airframes revenue of £1,957 million was 3% higher on a LFL basis. Defence
growth was strong, with revenue up 15% on a LFL basis, reflecting programme
ramp-ups and the work we have done to strengthen the business, including
repricing the Defence portfolio, with over 90% achieved by the end of the
year, exceeding our target. Within Defence, growth was driven by a number of
platforms including the F-35, CH-47 and C130J. LFL revenue in Civil was 2%
lower, with modest growth in our key narrowbody and widebody platforms, which
are still impacted by continued supply chain issues affecting OEM production
rates, offset by declines in business jets and other platforms.
Adjusted operating profit was up 10% at £156 million. Operating profit
margin of 8.0% was 80bps above the comparative period, reflecting the positive
impact of restructuring, portfolio rationalisation and business improvement
actions. While we saw substantial margin improvement in Defence, progression
was constrained in our Civil business reflecting a combination of lower sales
volumes, product mix and lower productivity at one of our manufacturing sites
in the Netherlands. We have a clear and actionable plan to deliver a
significant improvement at this site in 2026, including further supply chain
management.
The impact of foreign exchange translation was to reduce revenue and operating
profit by £8 million and £2 million respectively compared to 2024.
Airframes made good commercial progress during the year. In Civil, we
expanded engagement with Archer on the 'Midnight' platform to cover both
electrical systems and wing structures. The partnership supports Archer's
production ramp-up phase and reinforces both companies' commitment to
advancing sustainable aviation. The selection of the Midnight platform as
the Official Air Taxi Provider for the 2028 Los Angeles Olympics endorses the
strength of this technology and will provide a high-visibility demonstration
of urban air mobility.
Our Defence business signed multi-year continuation contracts with Lockheed
Martin for C-130J nacelles and BAE Systems for Typhoon canopies. We signed a
new Memorandum of Understanding with Airbus Helicopters, strengthening the
long-term strategic collaboration between Airbus, GKN Aerospace and the Dutch
defence industry. The relationship will advance the development of critical
systems for the Airbus H225M Caracal helicopter. In December, we announced
an agreement with Anduril Industries to collaborate on next generation
uncrewed aerial vehicle solutions. The partnership, which includes advanced
composite aerostructures, Electrical Wiring Interconnection Systems ("EWIS")
design and integration, a ground-based demonstrator, and advanced flight
testing will initially target the UK Government's upcoming Land Autonomous
Collaborative Platform contract and the British Army's Project NYX. We will
be joined by Archer's eVTOL expertise to deliver this project.
Airframes continued to make good progress operationally, including steps taken
to further enhance our manufacturing footprint. This included the
establishment of EWIS capability at our Mexico facility which successfully
progressed through first article approvals with Airbus with the full
standalone facility planned to be operational in 2026. Inward investment
continued in our machining and inspection capabilities for single aisle at our
Filton site, to deliver incremental rate readiness and systemic productivity
improvements. During the year, our Garden Grove facility achieved a number
of milestones, including the delivery of the 2,500(th) F-35 canopy and
1,000(th) CH-53K transparency. The site also moved its F‑35 canopy
facility expansion project into full execution, with the goal to be fully
operational in the second half of 2027.
The deployment of our 'Brilliant Basics' lean operating model continued to
drive operational improvements more broadly across Airframes. This, combined
with our investment in automation and digitalisation helped a number of sites
deliver significant improvements in productivity and efficiency savings during
2025. The division also made excellent progress in our top priority areas of
safety and quality, delivering a substantial reduction in its TIR of 55% and
an improvement in the COPQ of 8% respectively.
We have completed our multi-year transformation and restructuring programme.
Through the exit of non-core and loss-making businesses, we have materially
optimised and streamlined our global footprint. This, alongside the
drop-through impact of additional volumes as OE build rates ramp-up,
represents a key driver of further margin expansion over the next few years.
We made good progress developing our proprietary technology as part of our
position as a key partner on next generation platforms. In Civil, we continued
as a partner on Airbus' Aviation 2 project, the successor to the Wing of
Tomorrow programme, to develop advanced, efficient spar and fixed trailing
edge solutions. In parallel we launched the ASPIRE technology collaboration,
to further explore composite structures for the next generation of wings with
complex architecture. We are also collaborating with Airbus on the
application of electro-thermal technology for future ice protection systems
and on the adoption of more electrification and higher-voltage systems for the
future generation of aircraft to replace legacy bleed and hydraulic systems.
We also partnered with Airbus on the ICEFlight programme to develop the use of
cryogenics for more sustainable aircraft.
In Defence, we secured contracts and customer funding for the development and
delivery of an advanced canopy system utilising our latest generation canopy
coatings. Shortly before the year end, we launched a US$8.5 million TITAN-AM
programme with the US Air Force Research Laboratory to industrialise titanium
additive manufacturing for large aerostructures.
OUTLOOK
Airframes is a design-to-build partner on the world's highest volume platforms
today and is a partner of choice for emerging and next generation aircraft.
It is well-positioned to take advantage of the ongoing civil ramp up and
defence market growth, as well as the shift to more sustainable aviation over
time. With strong underlying dynamics in both markets, and our business
improvement actions now substantially complete, we expect to deliver further
profitable growth as production rates increase through the next five years.
In 2026, we expect the division to deliver revenue of £2,050 to £2,150
million and adjusted operating profit of £170 to £190 million (using an
exchange rate of 1 GBP = US$1.37).
Our medium-term targets for the Airframes division out to 2029 are to deliver
revenue growth of mid-single digit CAGR and expand operating margins to the
low-teens level.
CHIEF FINANCIAL OFFICER'S REVIEW
MELROSE GROUP RESULTS
Statutory results:
The statutory IFRS results show revenue of £3,589 million (2024: £3,468
million), an operating profit of £600 million (2024: loss of £4 million) and
a profit before tax of £468 million (2024: loss of £106 million). The
diluted earnings per share ("EPS"), calculated using the diluted weighted
average number of shares during the year of 1,276 million (2024: 1,324
million), were a profit of 29.0 pence (2024: loss of 3.7 pence).
Adjusted results:
The adjusted results exclude certain items which are significant in size or
volatility or by nature are non-trading or non-recurring, or any net change in
fair value items booked on an acquisition. It is the Group's accounting
policy to exclude these items from the adjusted results, which are used as an
Alternative Performance Measure ("APM") as described by the European
Securities and Markets Authority ("ESMA"). APMs used by the Group are
defined in the glossary to this Preliminary Announcement.
The Melrose Board considers the adjusted results to be an important measure
used to monitor how the Group is performing as they achieve consistency and
comparability between reporting periods when all subsidiaries are held for the
complete reporting period.
The adjusted results for the year ended 31 December 2025 show revenue of
£3,589 million (2024: £3,468 million), an operating profit of £647 million
(2024: £540 million) and a profit before tax of £515 million (2024: £438
million). Adjusted diluted EPS, calculated using the diluted weighted
average number of shares in the year of 1,276 million (2024: 1,324 million),
were 32.1 pence (2024: 26.4 pence).
The following table shows the adjusted results for the year ended 31 December
2025 split by reporting segment:
Engines Airframes Corporate Total
£m £m £m £m
Revenue 1,632 1,957 - 3,589
Operating profit/(loss) 520 156 (29) 647
Operating margin 31.9% 8.0% n/a 18.0%
Revenue for Engines of £1,632 million (2024: £1,459 million) shows constant
currency growth of 15% over 2024, with adjusted operating profit of £520
million (2024: £422 million) giving an operating margin of 31.9% (2024:
28.9%), an increase of 3.0 percentage points.
Revenue for Airframes of £1,957 million (2024: £2,009 million) shows
like-for-like constant currency growth of 3% over 2024, with adjusted
operating profit of £156 million (2024: £144 million) giving an operating
margin of 8.0% (2024: 7.2%), an increase of 0.8 percentage points.
Corporate costs of £29 million (2024: £26 million) included £27 million
(2024: £25 million) of operating costs and £2 million (2024: £1 million) of
costs in respect of the Performance Share Plan for certain senior managers in
the Group.
The performance of each reporting segment is discussed in the Chief Executive
Officer's review.
RECONCILIATION OF STATUTORY RESULTS TO ADJUSTED RESULTS
The following table reconciles the Group statutory operating profit/(loss) to
adjusted operating profit:
2025 2024
£m £m
Statutory operating profit/(loss) 600 (4)
Adjusting items:
Amortisation of intangible assets acquired in business combinations 252 255
Restructuring costs 34 111
Impairment of assets 6 -
Melrose equity-settled compensation scheme charges 1 14
(Gains)/losses in derivatives and associated financial assets and liabilities 112
(232)
Acquisition and disposal related gains and losses (11) 44
Net changes in fair value items (3) 8
Adjustments to statutory operating profit/(loss) 47 544
Adjusted operating profit 647 540
Adjusting items to statutory operating profit/(loss) are consistent with prior
years and include:
· The amortisation charge on intangible assets acquired in business
combinations of £252 million (2024: £255 million), which is excluded from
adjusted results due to its non-trading nature and to enable comparison with
companies that grow organically. However, where intangible assets are
trading in nature, such as computer software and development costs, the
amortisation is not excluded from adjusted results.
· Costs associated with significant restructuring projects in the
year which totalled £34 million (2024: £111 million). These are shown as
adjusting items due to their size and non-trading nature and include a charge
of £32 million (2024: £64 million) relating to the completion of significant
restructuring projects across sites in the Engines and Airframes divisions in
Europe and North America. This £32 million charge includes a charge of £8
million to create an onerous contract provision which is associated with our
significant restructuring projects in Europe in our Airframes division. These
projects are now complete after a cumulative charge since commencement of
£313 million (31 December 2024: £281 million). As at 31 December 2025,
£5 million is included in restructuring provisions in relation to these
projects.
· An impairment of property, plant and equipment of £6 million
(2024: £nil) in the Airframes division connected to our final significant
European restructuring project. This is shown as an adjusting item due to
its non-trading nature.
· A charge of £1 million (2024: £14 million) relating to the
Melrose equity-settled Employee Share Plan which matured during 2024,
representing a charge for employer's tax payable which was excluded from
adjusted results due to its size and volatility.
· Movements in the fair value of derivative financial instruments
(primarily forward foreign currency exchange contracts), where hedge
accounting is not applied, along with foreign exchange movements on the
associated financial assets and liabilities, entered into within the
businesses to mitigate the potential volatility of future cash flows on
long-term foreign currency customer and supplier contracts. This totalled a
credit of £232 million (2024: charge of £112 million) in the year and is
shown as an adjusting item because of its volatility and size.
· Acquisition and disposal related gains of £11 million (2024: net
losses of £44 million) which relate to the release of provisions associated
with legacy business disposals that are no longer required. The gains are
recorded as an adjusting item due to their non-trading nature.
· The net changes in fair value items in the year which totalled a
credit of £3 million (2024: charge of £8 million) and are shown as an
adjusting item, due to their nature and volatility.
The following table shows the allocation of adjusting items, described above,
by reporting segment:
Engines Airframes Corporate Total
£m £m £m £m
Statutory operating profit/(loss) 367 (6) 239 600
Adjusting items 153 162 (268) 47
Adjusted operating profit/(loss) 520 156 (29) 647
FINANCE COSTS AND INCOME
Net finance costs for the year ended 31 December 2025 were £132 million
(2024: £102 million), with no adjusting items in the current or prior
year. These included net interest on external bank loans, bonds,
overdrafts, factoring facilities and cash balances of £107 million (2024:
£88 million).
Net finance costs also included: a £6 million (2024: £4 million)
amortisation charge relating to the arrangement costs of raising the Group's
current bank facilities; an interest charge on net pension liabilities of £3
million (2024: £4 million); a charge on lease obligations of £12 million
(2024: £6 million); and a charge for the unwind of discounting on long-term
liabilities of £4 million (2024: £nil).
TAX
The statutory results show a tax charge of £98 million (2024: credit of £57
million) which arises on a statutory profit before tax of £468 million (2024:
loss of £106 million), resulting in a statutory tax rate of 20.9% (2024:
53.8%). The effective tax rate on adjusted profit before tax for the year
ended 31 December 2025 was 20.4% (2024: 20.1%).
The statutory tax rate is higher than the adjusted tax rate because the
intangible asset amortisation and other adjusting items generate adjusting tax
credits and charges at rates higher than 20%, resulting in an overall tax
credit effect.
The Group has £823 million (31 December 2024: £868 million) of deferred tax
assets comprising: £530 million (31 December 2024: £522 million) on tax
losses; and £293 million (31 December 2024: £346 million) on retirement
benefit obligations and other temporary differences. These are offset by
deferred tax liabilities on intangible assets of £347 million (31 December
2024: £423 million), temporary differences related to revenue recognition of
£304 million (31 December 2024: £259 million) and other deferred tax
liabilities of £77 million (31 December 2024: £52 million), totalling £728
million (31 December 2024: £734 million). In certain cases (typically where
they arise in the same territory or tax group), deferred tax assets and
liabilities must be offset, resulting in deferred tax assets of £659 million
(31 December 2024: £651 million) and deferred tax liabilities of £564
million (31 December 2024: £517 million) being shown on the Balance Sheet at
31 December 2025. Most of the tax losses and other deferred tax assets will
generate future cash tax savings. The deferred tax liabilities on intangible
assets are not expected to give rise to cash tax payments.
Net cash tax paid in the year ended 31 December 2025 was £12 million (2024:
£10 million), 2.3% (2024: 2.3%) of adjusted profit before tax. This is lower
than the adjusted tax rate primarily due to the utilisation of tax losses and
other timing differences between accounting and taxable profits.
SHARE BUYBACK PROGRAMMES AND NUMBER OF SHARES IN ISSUE
The Group commenced a £250 million share buyback programme on 1 October 2024
making market purchases of existing ordinary shares in the Company. During
the year ended 31 December 2025, 31,515,908 ordinary shares were purchased at
an average price per share of 551 pence and transferred to treasury.
Additionally, 3,114,036 shares were issued out of treasury to a participant of
the Melrose Employee Share Plan following the exercise of nil-cost options.
The number of ordinary shares in issue, excluding treasury shares, has
reduced by 2% from 1,286 million at 31 December 2024 to 1,258 million at 31
December 2025.
The weighted average number of shares used for basic earnings per share
calculations in the year ended 31 December 2025 was 1,272 million (2024: 1,307
million), and when including the number of shares expected to be issued from
the Melrose equity-settled share plans, the weighted average number of shares
used for diluted earnings per share was 1,276 million (2024: 1,324
million).
CASH GENERATION AND MANAGEMENT
Free cash flow was an inflow of £125 million (2024: outflow of £74
million). An analysis of free cash flow is shown in the table below:
2025 2024
£m £m
Adjusted operating profit 647 540
Depreciation and amortisation 138 142
Lease obligation payments (31) (32)
Positive non-cash impact from loss-making contracts (11) (23)
Working capital movements:
Inventory (32) (71)
Receivables and payables 65 51
Unbilled work done (324) (274)
GTF PMI payments (68) (35)
Adjusted operating cash flow (pre-capex) 384 298
Capital expenditure (94) (123)
Defined benefit pension contributions (22) (20)
Restructuring (31) (126)
Net other 15 (6)
Free cash flow pre-interest and tax 252 23
Net interest and net tax paid (127) (97)
Free cash flow 125 (74)
Working capital movements excluding unbilled work done totalled an inflow of
£33 million (2024: outflow of £20 million) for the year ended 31 December
2025 being an outflow of £32 million (2024: £71 million) in inventory offset
by a £65 million inflow (2024: £51 million) from receivables and payables.
Inventory increased during the year due to a combination of supporting
customer build rates and supply chain issues. Inventory temporarily
increased in the first half due to tariff related issues, but these eased in
the second half contributing to a second half reduction.
As anticipated, working capital inflows from receivables and payables were
strong in the second half of the year reflecting the typical seasonality of
the Group and customer settlements.
Unbilled work done has increased in the year ended 31 December 2025 by £324
million (2024: £274 million) in accordance with the development anticipated
in our Risk and Revenue Sharing Partnership booklet. Payments of £68
million (2024: £35 million) have been made for obligations in connection with
powder metal issues on the Pratt & Whitney PW1100G engine.
Capital expenditure in the year ended 31 December 2025 was £94 million (2024:
£123 million). Capital expenditure represented 0.9x (2024: 1.1x)
depreciation of owned assets.
Restructuring spend in the year reduced to £31 million (2024: £126 million)
as our multi-year restructuring projects were completed.
Net other includes £28 million generated from the sale and leaseback of owned
land and buildings at one Group facility, which was combined with an existing
property lease at the same facility into a single, more efficient lease
arrangement, offset by other movements including divisional management
incentive scheme related payments of £7 million.
Net interest paid in the year was £115 million (2024: £87 million)
comprising £103 million (2024: £81 million) of net interest paid on loans,
bonds, overdrafts, factoring facilities and cash balances, and £12 million
(2024: £6 million) of interest paid on lease obligations. In addition, net
tax payments were £12 million (2024: £10 million) and ongoing contributions
to defined benefit pension schemes were £22 million (2024: £20 million).
The movement in net debt is summarised as follows:
£m
Opening net debt (1,321)
Free cash flow 125
Amounts paid to shareholders including associated costs (255)
Net cash flow from acquisitions and disposals (16)
FX and other non-cash movements 68
Other (8)
Net debt at 31 December 2025 at closing exchange rates (1,407)
Group net debt at 31 December 2025, translated at closing exchange rates
(being US$1.35 and €1.15), was £1,407 million (31 December 2024: £1,321
million), after a free cash inflow of £125 million, described above.
Movements in Group net debt also included dividends paid to shareholders of
£82 million, £173 million spent buying back shares in the market, £16
million net cash outflow from acquisitions and disposals of businesses and net
favourable foreign exchange and other non-cash movements of £68 million.
Group leverage at 31 December 2025 was 1.8x EBITDA (31 December 2024: 1.9x
EBITDA) and interest cover was 6.9x (31 December 2024: 7.4x).
ASSETS AND LIABILITIES AND IMPAIRMENT REVIEW
The summarised Melrose Group assets and liabilities are shown below:
2025 2024
£m £m
Goodwill and intangible assets acquired with business combinations 2,503 2,878
Tangible fixed assets, computer software and development costs 1,051 1,037
Net working capital(1) 962 699
Net retirement benefit obligations (27) (59)
Provisions (147) (184)
Deferred tax and current tax 81 119
Lease obligations (330) (237)
Net other 141 (88)
Total 4,234 4,165
(1) Includes £1,308 million of unbilled work done (31 December 2024: £922
million)
Lease obligations increased as a number of leases were either entered into,
renewed or extended and consequently the liabilities and associated
right-of-use assets were remeasured.
Net other of £141 million primarily represents a net derivative financial
asset which has moved from a net derivative financial liability as a result of
exchange rate fluctuations during the year.
The Group's goodwill has been tested for impairment, and in accordance with
IAS 36 Impairment of Assets the Board is comfortable that no impairment is
required as at 31 December 2025.
The assets and liabilities shown above are funded by:
2025 2024
£m £m
Net debt (1,407) (1,321)
Equity (2,827) (2,844)
Total (4,234) (4,165)
( )
Net debt shown in the table above is defined in the glossary to this
Preliminary Announcement.
PROVISIONS
Total provisions at 31 December 2025 were £147 million (31 December 2024:
£184 million).
The following table details the movement in provisions in the year:
£m
Provisions at 1 January 2025 184
Net charge in the year 26
Spend against provisions (48)
Utilisation of loss-making contract provision (11)
Exchange adjustments (4)
Provisions at 31 December 2025 147
The net charge to the Income Statement in the year was £26 million, and
included £23 million relating to restructuring activities, a £14 million
loss-making contract provision charge offset by an £11 million provision
release associated with legacy business disposals which is no longer
required.
During the year, £11 million was utilised against loss-making contract
provisions and £48 million of cash was spent against provisions with £31
million relating to restructuring activities.
Net provision movements relating to property, environmental, litigation and
warranty were not material in the year.
PENSIONS AND POST-EMPLOYMENT OBLIGATIONS
Melrose operates a number of defined benefit pension schemes and retiree
medical plans across the Group, accounted for using IAS 19 Revised: Employee
Benefits.
The values of the Group plans were updated at 31 December 2025 by independent
actuaries to reflect the latest key assumptions and are summarised as follows:
Liabilities Accounting surplus/(deficit)
Assets £m £m
£m
GKN UK Group Pension Scheme - Number 1 579 (577) 2
Other Group pension schemes - (29) (29)
Total Group pension schemes 579 (606) (27)
At 31 December 2025, the total plan assets of Melrose Group's defined benefit
pension plans were £579 million (31 December 2024: £986 million) and total
plan liabilities were £606 million (31 December 2024: £1,045 million), a net
deficit of £27 million (31 December 2024: £59 million).
The GKN UK Group Pension Scheme (Number 1) is the most significant pension
plan in the Group, and is closed to new members and to the accrual of future
benefits for current members.
At 31 December 2025, the GKN UK Group Pension Scheme (Number 1) had gross
assets of £579 million (31 December 2024: £577 million), gross liabilities
of £577 million (31 December 2024: £599 million), resulting in a net surplus
of £2 million (31 December 2024: deficit of £22 million).
During the year ended 31 December 2025, the Group finalised processes to
buy-out both the GKN UK Group Pension Scheme (Number 4) and the US
Consolidated Pension Plan. The scheme assets and liabilities have left the
Group and are no longer shown on the Group's Balance Sheet.
In total, contributions to the Group defined benefit pension plans and
post-employment medical plans in the year ended 31 December 2025 were £22
million (2024: £20 million) and are expected to be approximately £20 million
in 2026.
A summary of the assumptions used are shown in note 11 to this Preliminary
Announcement.
FINANCIAL RISK MANAGEMENT
The Group continuously assesses its financial risks and implements policies to
manage them effectively. The most significant financial risks are considered
to relate to liquidity, finance costs, foreign exchange rates, contract and
warranties and commodities, each of which is discussed below.
Liquidity risk management
The Group's net debt position at 31 December 2025 was £1,407 million (31
December 2024: £1,321 million). During the year, the Group arranged
additional committed bank facilities of €355 million maturing in January
2027 and facilities totalling US$70 million and £50 million maturing in
January 2026. In addition, bank facilities totalling US$29 million were
cancelled.
The facilities outstanding as at 31 December 2025 totalled US$1,680 million,
€755 million and £350 million. Within these amounts, US$1,610 million,
€400 million and £300 million of facilities were due to mature in April
2026, but with the potential to be extended for two additional one-year
periods at the Group's option. Subsequent to 31 December 2025, these
facilities have been extended for an additional year to April 2027, with the
second one-year extension option still available to the Group.
Subsequent to 31 December 2025, the £50 million facility maturing January
2026 was extended to January 2027, and for the €355 million facilities
maturing in January 2027 the Group has arranged for the potential to extend
the facilities for one year at the Group's option.
Details of the facilities and amounts borrowed as at 31 December 2025 are
shown below:
Local currency £m
Size Drawn Headroom Headroom
Term loan:
USD 549 549 - -
EUR 415 280 135 118
Revolving credit facility:
USD 1,131 975 156 116
GBP 350 184 166 166
EUR 340 2 338 294
Total (GBP) 2,257 1,563 694
In addition to the headroom of £694 million on committed facilities, there
are a number of uncommitted overdraft, guarantee and borrowing facilities made
available to the Group. As at 31 December 2025, there were cash and cash
equivalents, net of overdrafts, totalling £154 million (31 December 2024:
£80 million).
The committed bank funding has two financial covenants, being a net debt to
adjusted EBITDA covenant (banking covenant leverage) and an interest cover
covenant, both of which are tested half-yearly at 30 June and 31 December.
Both covenants have comfortable headroom with the banking covenant leverage
test level set at 3.5x, and as at 31 December 2025 it was 1.9x. The interest
cover test is set at 4.0x, and as at 31 December 2025 the Group interest cover
was 6.9x.
A limited number of Group trade receivables are subject to non-recourse
factoring and customer supply chain finance arrangements. As at 31 December
2025, these amounted to £396 million (31 December 2024: £338 million). No
new schemes were added during the year and the increase in the amount factored
represents year over year revenue growth on the associated programmes.
Finance cost risk management
The Group uses financial derivatives to fix a portion of the interest cost on
its committed bank facilities.
The maximum weighted average rates, excluding the bank margin, the Group will
pay on the fixed portions of its US dollar, Euro and Sterling bank debt are
3.7%, 2.6% and 3.9% respectively.
The margin on the bank facilities depends on the banking covenant leverage and
were as follows:
31 Dec 2025 31 Dec 2024
Facility: Margin Range Margin Range
Term Loan 1.40%-1.75% 0.90%-2.40% 1.40% 1.00%-2.30%
Revolving Credit Facilities 1.40%-1.75% 1.00%-2.40% 1.40%-1.55% 1.00%-2.40%
The Group's cost of drawn debt for the next 12 months is currently expected to
be approximately 5.3%.
Exchange rate risk management
The Group trades in various countries around the world and is exposed to
movements in a number of foreign currencies.
The Group carries exchange rate risk that can be categorised into two types:
transaction and translation risk, as described in the paragraphs below. The
Group's policy is designed to protect against the majority of the cash risks
but not the non-cash risks.
The most common exchange rate risk is the transaction risk the Group takes
when it invoices a customer or purchases from suppliers in a different
currency to the underlying functional currency of the relevant business. The
Group's policy is to review transactional foreign exchange exposures and place
necessary hedging contracts on a rolling quarterly basis. To the extent the
cash flows associated with a transactional foreign exchange risk are
committed, the Group will hedge 100% at the time the cash flow becomes
committed. For forecast and variable cash flows, the Group hedges a proportion
of the expected cash flows, with the percentage being hedged lowering as the
time horizon lengthens. The Group hedges on a sliding scale, typically hedging
around 90% of foreign exchange exposures expected over the next 12 months,
with the percentage decreasing by approximately 10 percentage points for each
subsequent year. This policy does not eliminate the cash risk but does bring
some certainty to it.
The translation rate risk is the effect on the Group results in the period due
to the movement of exchange rates used to translate foreign results into
Sterling from one period to the next. No specific exchange instruments are
used to protect against the translation risk because it is a non-cash risk to
the Group, until foreign currency is subsequently converted to Sterling.
However, the Group utilises its multi-currency banking facilities, where
relevant, to maintain an appropriate mix of debt in each currency. The hedge
of having debt drawn in these currencies funding the trading units with US
dollars or Euro functional currencies protects against some of the Balance
Sheet and banking covenant translation risk.
Exchange rates for currencies most relevant to the Group in the year were:
Closing rate
Average rate
US dollar
2025 1.32 1.35
2024 1.28 1.25
Euro
2025 1.17 1.15
2024 1.18 1.21
A 1 cent strengthening of the major currencies within the Group, if this were
to happen in isolation against all other currencies, would have the following
impact on the re-translation of adjusted operating profit into Sterling:
USD EUR
Increase in adjusted operating profit - £ million 5 1
% impact on adjusted operating profit 0.7% 0.1%
The impact from transactional foreign exchange exposures is not material in
the short term due to hedge coverage being approximately 90%.
A 1 cent strengthening in either the US dollar or Euro would have the
following impact on gross debt as at 31 December 2025:
USD EUR
Increase in gross debt - £ million 9 2
Increase in gross debt 1% 0%
Contract and warranty risk management
A suitable bid and contract management process exists in the businesses, which
includes thorough reviews of contract terms and conditions, contract-specific
risk assessments and clear delegation of authority for approvals. These
processes aim to ensure effective management of risks associated with complex
contracts. The financial risks connected with contracts and warranties
include the consideration of commercial, legal and warranty terms and their
duration, which are all considered carefully by the businesses and Group
management before being entered into.
Commodity cost risk management
The cumulative expenditure on commodities is important to the Group and the
risk of base commodity costs increasing is mitigated, wherever possible, by
passing on the cost increases to customers, by the use of customer directed
suppliers under common agreements, or by having suitable purchase agreements
with suppliers which fix the price over a certain period. Where possible,
these risks are also managed through sourcing policies, including the use of
multiple suppliers and procurement contracts where prices are agreed in
advance to limit exposure to price volatility. The Group selectively uses
financial derivatives where changes in commodity costs cannot be passed on to
customers or fixed with suppliers.
GOING CONCERN
As part of their consideration of going concern, the Directors have reviewed
the Group's future cash forecasts and projections, which are based on both
market and internal data and recent past experience.
The Directors recognise the challenges in the current economic environment,
including challenges in supply chains and geopolitical risks. The Group is
actively managing the associated impacts on trading through a sharp focus on
pricing, productivity and costs. In addition, the Group's cash flow forecasts
consider any impacts from further economic factors.
The Group has modelled a severe but plausible downside case against these
future cash forecasts and throughout this scenario the Group would not breach
any financial covenants and would not require any additional sources of
financing.
The macroeconomic environment remains uncertain and volatile and the impacts
of economic factors such as inflation, high interest rates, geopolitical
conflict and challenges in supply chains could be more prolonged or severe
than that which the Directors have considered in the Group's severe but
plausible downside case.
Considering the Group's current committed bank facility headroom, its access
to liquidity, and the level of bank covenants in place with lending banks, the
Directors consider it appropriate that the Group can manage its business risks
successfully and adopt a going concern basis in preparing the Consolidated
Financial Statements.
Matthew Gregory
Chief Financial Officer
27 February 2026
CAUTIONARY STATEMENT
This announcement contains statements that are, or may be deemed to be,
"forward-looking statements". These forward-looking statements may be
identified by the use of forward-looking terminology, including the terms
"believes", "estimates", "plans", "projects", "anticipates", "potential",
"predicts", "expects", "intends", "may", "will", "can", "likely" or "should"
or, in each case, their negative or other variations or comparable
terminology, or by discussions of strategy, plans, objectives, goals, future
events or intentions. Forward-looking statements may and often do differ
materially from actual results. Any forward-looking statements reflect the
Company's current view with respect to future events and are subject to risks
relating to future events and other risks, uncertainties and assumptions
relating to the business, results of operations, financial position,
liquidity, prospects, growth and strategies of the Group. Forward-looking
statements speak only as of the date they are made. In light of these risks,
uncertainties and assumptions, the events in the forward-looking statements
may not occur or the Company's or the Group's actual results, performance or
achievements of the Company might be materially different from the expected
results, performance or achievements expressed or implied by such
forward-looking statements. Forward-looking statements contained in this
announcement speak only as at the date of this announcement. The Company
expressly disclaims any obligation or undertaking to update these
forward-looking statements contained in this announcement to reflect any
change in their expectations or any change in events, conditions, or
circumstances on which such statements are based unless required to do so by
applicable law, the UK Listing Rules and the Disclosure Guidance and
Transparency Rules of the FCA or Regulation (EU) 596/2014 as it forms part of
the domestic law of the United Kingdom by virtue of the European Union
(Withdrawal) Act 2018.
Consolidated Income Statement
Notes Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Revenue 3 3,589 3,468
Cost of sales (2,635) (2,646)
Gross profit 954 822
Operating expenses (354) (826)
Operating profit/(loss) 3, 4 600 (4)
Finance costs (132) (105)
Finance income - 3
Profit/(loss) before tax 5 468 (106)
Tax (98) 57
Profit/(loss) after tax for the year attributable to owners of the parent 370 (49)
Earnings per share 7 29.1p (3.7)p
- Basic 7 29.0p (3.7)p
- Diluted
Adjusted((1)) results
Adjusted operating profit 3, 4 647 540
Adjusted profit before tax 4 515 438
Adjusted profit after tax 4 410 350
Adjusted basic earnings per share 7 32.2p 26.8p
Adjusted diluted earnings per share 7 32.1p 26.4p
(1) Defined in note 2.
All results arise from continuing operations.
Consolidated Statement of Comprehensive Income
Notes Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Profit/(loss) after tax for the year 370 (49)
5 16 27
Items that will not be reclassified subsequently to the Income Statement: - (47)
Net remeasurement gain on retirement benefit obligations 3 (4)
Fair value loss on investments in equity instruments
Income tax credit/(charge) relating to items that will not be reclassified
Items that may be reclassified subsequently to the Income Statement: 19 (24)
Currency translation on investments, net of investment hedging
Transfer to Income Statement from equity of cumulative translation differences 5 (125) 17
on disposal of foreign operations
Derivative (losses)/gains on hedge relationships
- (6)
Income tax credit/(charge) relating to items that may be reclassified
(12) 3
6 (1)
(131) 13
Other comprehensive expense for the year (112) (11)
Total comprehensive income/(expense) for the year attributable to owners of 258 (60)
the parent
Consolidated Statement of Cash Flows
Notes Year ended Year ended
31 December
31 December
2025
2024
£m
£m
Operating activities
Net cash from/(used in) operating activities 12 214 (121)
55
Investing activities (20) (108)
Disposal of businesses, net of cash disposed (86) -
Purchase of property, plant and equipment 29 (15)
Proceeds from disposal of property, plant and equipment (9) -
Purchase of computer software and capitalised development costs (5) -
Acquisition of subsidiaries, net of cash acquired 9 (3)
Disposal of investments - 3
Equity accounted investment additions -
Interest received
Net cash used in investing activities (82) (68)
(10)
Financing activities - 767
Repayment of borrowings 229 (3)
Drawings on borrowing facilities (1) (32)
Costs of raising debt finance (31) (431)
Payment of principal under lease obligations 6 (173) (72)
Purchase of own shares, including associated costs 6 (82)
Dividends paid to owners of the parent
Net cash (used in)/from financing activities (58) 219
12 74 30
Net increase in cash and cash equivalents, net of bank overdrafts 12 80 57
Cash and cash equivalents, net of bank overdrafts at the beginning of the year - (7)
Effect of foreign exchange rate changes
Cash and cash equivalents, net of bank overdrafts at the end of the year 12 154 80
As at 31 December 2025, the Group had net debt of £1,407 million (31 December
2024: £1,321 million). A definition and reconciliation of the movement in net
debt is shown in note 12.
Consolidated Balance Sheet
Notes 31 December 31 December
2025
2024
£m
£m
Non-current assets 8 2,690 3,094
Goodwill and other intangible assets 11 864 821
Property, plant and equipment 56 69
Investments 6 8
Interests in equity accounted investments 659 651
Deferred tax assets 84 12
Derivative financial assets 1,526 1,201
Other receivables 2 -
Retirement benefit surplus
5,887 5,856
Current assets 542 528
Inventories 8 971 949
Trade and other receivables 29 10
Derivative financial assets 1 5
Current tax assets 166 88
Cash and cash equivalents
1,709 1,580
Total assets 3 7,596 7,436
Current liabilities 9 1,544 1,510
Trade and other payables 60 8
Interest-bearing loans and borrowings 31 33
Lease obligations 23 72
Derivative financial liabilities 15 20
Current tax liabilities 10 64 108
Provisions
1,737 1,751
Net current liabilities (28) (171)
Non-current liabilities 9 533 469
Other payables 1,513 1,401
Interest-bearing loans and borrowings 299 204
Lease obligations 11 115
Derivative financial liabilities 564 517
Deferred tax liabilities 11 29 59
Retirement benefit obligations 10 83 76
Provisions
3,032 2,841
Total liabilities 3 4,769 4,592
Net assets 2,827 2,844
1 1
Equity 1,000 1,000
Issued share capital 109 109
Share premium account - -
Merger reserve (2,330) (2,330)
Capital redemption reserve 155 286
Other reserves 3,892 3,778
Translation and hedging reserve
Retained earnings
Total equity attributable to owners of the parent 2,827 2,844
The Financial Statements were approved and authorised for issue by the Board
of Directors on 27 February 2026 and were signed on its behalf by:
Matthew Gregory Peter Dilnot
Chief Financial Officer Chief Executive Officer
27 February 2026 27 February 2026
Consolidated Statement of Changes in Equity
Issued share capital Share premium account Merger reserve Other reserves Translation and hedging reserve Retained earnings Total equity attributable to owners
of the parent
£m £m £m Capital redemption reserve £m £m £m
£m
£m
At 1 January 2024 309 3,271 109 753 (2,330) 273 1,182 3,567
Loss for the year - - - - - - (49) (49)
Other comprehensive income/(expense) - - - - - 13 (24) (11)
Total comprehensive income/(expense) - - - - - 13 (73) (60)
Purchase of own shares((1)) - - - - - - (449) (449)
Dividends paid (note 6) - - - - - - (72) (72)
Capital reduction((1)) (308) (2,271) - (753) - - 3,332 -
Equity-settled incentive scheme related((1)) - - - - - - (157) (157)
Equity-settled share-based payments - - - - - - 1 1
Deferred tax on equity-settled share-based payments (note 5)
- - - - - - 14 14
At 31 December 2024 1 1,000 109 - (2,330) 286 3,778 2,844
Profit for the year - - - - - - 370 370
Other comprehensive (expense)/income - - - - - (131) 19 (112)
Total comprehensive (expense)/income - - - - - (131) 389 258
Purchase of own shares((1)) - - - - - - (193) (193)
Dividends paid (note 6) - - - - - - (82) (82)
Equity-settled share-based payments - - - - - - 2 2
Deferred tax on equity-settled share-based payments (note 5)
- - - - - - (2) (2)
At 31 December 2025 1 1,000 109 - (2,330) 155 3,892 2,827
(1) Further information is set out in note 1.
Notes to the Consolidated Financial Statements
1. Corporate information
The financial information included within this Preliminary Announcement does
not constitute the Company's statutory Financial Statements for the years
ended 31 December 2025 or 31 December 2024 within the meaning of s435 of the
Companies Act 2006, but is derived from those Financial Statements. Statutory
Financial Statements for the year ended 31 December 2024 have been delivered
to the Registrar of Companies and those for the year ended 31 December 2025
will be delivered to the Registrar of Companies during April 2026. The auditor
has reported on those Financial Statements; their reports were unqualified,
did not draw attention to any matters by way of emphasis and did not contain
statements under s498(2) or (3) of the Companies Act 2006. While the financial
information included in this Preliminary Announcement has been prepared in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRSs") adopted pursuant to IFRSs as issued by
the IASB, this announcement does not itself contain sufficient information to
comply with IFRSs. The Company expects to publish full Financial Statements
that comply with IFRSs during April 2026.
Corporate structure
Capital structure
On 1 October 2024, the Group commenced a £250 million share buyback programme
which is expected to complete by the end of March 2026. During the year ended
31 December 2025, 31,515,908 shares (2024: 4,173,411 shares) were purchased at
an average price of 551 pence (2024: 484 pence) per share for total
consideration of £173 million (2024: £20 million), inclusive of costs of £1
million (2024: £nil). These are held as treasury shares. A liability of £38
million (31 December 2024: £18 million) has also been recognised in respect
of the shares expected to be purchased under the share buyback programme
during the close period, as there was an irrevocable instruction to contracted
financial institutions to complete purchases at 31 December 2025. The total
costs of the purchase of £193 million recognised during the year ended 31
December 2025 have been recorded in retained earnings.
In the prior year, the Group completed a £500 million share buyback programme
which commenced in 2023. During the year ended 31 December 2024, 70,967,661
shares were purchased at an average price of 571 pence per share with cash
spent of £411 million, inclusive of costs of £5 million. The total costs
of the purchase were recognised in retained earnings.
In the prior year, the Melrose Employee Share Plan ("MESP") crystallised. Of
the 54,346,536 shares awarded, 25,498,465 were withheld by the Company in
exchange for a cash payment sufficient to allow holders to meet their income
tax and employee national insurance liabilities in respect of the MESP. In
accordance with IFRS 2: Share-based Payment, £157 million was recognised in
retained earnings. In addition, the Group undertook a capital reduction. This
reduced share capital by £308 million, the share premium account by £2,271
million and the capital redemption reserve by £753 million.
Acquisitions
On 13 January 2025, the Group acquired the entire share capital of TPC
Components AB, a company specialising in precision cast products based in
Sweden, for consideration of £5 million.
Disposals
In the prior year, the Group disposed of its Fuel Systems business, its St.
Louis operation and its Orangeburg operation. The results of the three
businesses disposed were not classified within discontinued operations as they
did not meet the criteria of being a major separate line of business.
Going concern
The Consolidated Financial Statements have been prepared on a going concern
basis as the Directors consider that adequate resources exist for the Company
to continue in operational existence for the foreseeable future, being 12
months from the date of this report (the relevant period).
The Group's liquidity and funding arrangements are described in the Chief
Financial Officer's Review. There is significant liquidity headroom
of £0.7 billion at 31 December 2025 and sufficient headroom throughout the
going concern forecast period. Forecast covenant compliance is considered
further below.
Covenants
The Group's banking facility has two financial covenants being a net debt to
adjusted EBITDA covenant and an interest cover covenant, both of which are
tested half-yearly at 30 June and 31 December. Covenant calculations are
detailed in the glossary to this Preliminary Announcement.
The financial covenants during the period of assessment for going concern are
as follows:
31 December 30 June 31 December
2025 2026 2026
Net debt to adjusted EBITDA (banking covenant leverage) 3.5x 3.5x 3.5x
Interest cover 4.0x 4.0x 4.0x
Testing
The Group has modelled two scenarios in its assessment of going concern, a
base case and a severe but plausible downside case.
The base case takes into account end markets and operational factors,
including supply chain challenges, throughout the going concern period and has
been monitored against the actual results and cash generation in the period
since 1 January 2026. Climate scenario analysis was used to model the impact
of climate change on the Group's cash flow position. Climate change is deemed
to not have a material impact over the period of 12 months for the assessment
of going concern.
The severe but plausible downside case models more conservative revenue
assumptions for 2026 and the first half of 2027. The sensitised assumptions
are specific to each business taking into account their markets, but on
average represent a c.10% reduction to the Group's forecast revenue in 2026,
and a c.5% reduction in the first half of 2027. The sensitised revenues have
had a consequential impact on profit and cash flow, along with a further
downside sensitivity applied to increase working capital by approximately 2%
of revenue. Given that there is liquidity headroom of £0.7 billion and the
Group's banking covenant leverage was 1.9x, comfortably below the covenant
test at 31 December 2025, no further sensitivity detail is provided.
Under the severe but plausible downside case no covenant is breached at 30
June 2026 nor, based on the continuation of existing financing arrangements
with the Group having the option to extend the majority of its facilities
through to April 2028, at 31 December 2026 or 30 June 2027.
2. Alternative Performance Measures
The Group presents Alternative Performance Measures ("APMs") in addition to
the statutory results of the Group. These are presented in accordance with the
Guidelines on APMs issued by the European Securities and Markets Authority
("ESMA").
APMs used by the Group are set out in the glossary to these Financial
Statements and the reconciling items between statutory and adjusted results
are listed below and described in more detail in note 4.
Adjusted profit measures exclude items which are significant in size or
volatility or by nature are non-trading or non-recurring or any net change
in fair value items booked on an acquisition.
On this basis, the following are the principal items included within adjusting
items impacting operating profit:
· Amortisation of intangible assets that are acquired in a business
combination, excluding computer software and development costs;
· Significant restructuring project costs and other associated
costs, including losses incurred following the announcement of closure for
identified businesses, arising from significant strategy changes that are not
considered by the Group to be part of the normal operating costs of the
business;
· Acquisition and disposal related gains and losses;
· Impairment charges that are considered to be significant to the
trading performance of the business;
· Movement in derivative financial instruments not designated in
hedging relationships, including revaluation of associated financial assets
and liabilities;
· The charge for the previous Melrose equity-settled compensation
scheme, including its associated employer's tax charge; and
· The net change in fair value items booked on acquisitions.
Further to the adjusting items above, adjusting items impacting profit before
tax include:
· Acceleration of unamortised debt issue costs written off as a
consequence of Group refinancing; and
· Significant settlement gains and losses associated with debt
instruments including interest rate swaps following acquisition or disposal
related activity or non-trading transactions, which are not considered by the
Group to be part of normal financing costs.
In addition to the items above, adjusting items impacting profit after tax
include:
· The net effect on tax of significant restructuring from strategy
changes that are not considered by the Group to be part of the normal
operating costs of the business;
· The net effect of significant new tax legislation; and
· The tax effects of adjustments to profit before tax, described
above.
The Board considers the adjusted results to be an important measure used to
monitor how the Group is performing, as this provides a meaningful reflection
of how the Group is managed and measured on a day-to-day basis and achieves
consistency and comparability between reporting periods, when all subsidiaries
are held for a complete reporting period.
The adjusted measures are used to partly determine the variable element of
remuneration of senior management throughout the Group and are also in
alignment with performance measures used by certain external stakeholders.
Adjusted profit is not a defined term under IFRS and may not be comparable
with similarly titled profit measures reported by other companies. It is not
intended to be a substitute for, or superior to, GAAP measures. All APMs
relate to the current year results and comparative periods where provided.
3. Segment information
Segment information is presented in accordance with IFRS 8: Operating
Segments, which requires operating segments to be identified on the basis of
internal reports about components of the Group that are regularly reported to
the Group's Chief Operating Decision Maker ("CODM"), which has been deemed to
be the Group's Board, in order to allocate resources to the segments and
assess their performance. During the year, the Structures segment was renamed
Airframes.
The operating segments are as follows:
Engines - An industry leading global tier one supplier to the aerospace
engines market, including structural engineered components; parts repair;
commercial and aftermarket contracts.
Airframes - A multi-technology global tier one supplier of both civil and
defence airframes, including lightweight composite and metallic structures;
electrical distribution systems and components.
In addition, there is a corporate cost centre which is also reported to the
Board containing the Group's head office costs.
Reportable segment results include items directly attributable to a segment as
well as those which can be allocated on a reasonable basis.
Inter-segment pricing is determined on an arm's length basis in a manner
similar to transactions with third parties.
The Group's geographical segments are determined by the location of the
Group's non-current assets and, for revenue, the location of external
customers. Inter-segment sales are not material and have not been disclosed.
The following tables present the results and certain asset and liability
information regarding the Group's operating segments and corporate cost centre
for the year ended 31 December 2025.
a) Segment revenues
The Group derives its revenue from the transfer of goods and services over
time and at a point in time. The Group has assessed that the disaggregation of
revenue recognised from contracts with customers by operating segment is
appropriate as this is the information regularly reviewed by the CODM in
evaluating financial performance. The Group also believes that presenting this
disaggregation of revenue based on the timing of transfer of goods or
services provides useful information as to the nature and timing of revenue
from contracts with customers.
Year ended 31 December 2025 Engines Airframes Total
£m £m £m
Timing of revenue recognition
At a point in time 1,110 1,137 2,247
Over time 522 820 1,342
Revenue 1,632 1,957 3,589
Year ended 31 December 2024((1)) Engines Airframes Total
£m £m £m
Timing of revenue recognition 949 1,190 2,139
At a point in time 510 819 1,329
Over time
Revenue 1,459 2,009 3,468
(1) For the year ended 31 December 2024, £313 million of revenue (Engines:
£187 million, Airframes: £126 million) has been re-presented as revenue
recognised over time, with a corresponding decrease in revenue recognised at a
point in time, with no change to total revenue.
b) Segment operating profit
Year ended 31 December 2025 Engines Airframes Corporate((1)) Total
£m £m £m £m
Adjusted operating profit/(loss) 520 156 (29) 647
Items not included in adjusted operating profit((2)):
Amortisation of intangible assets acquired in business combinations (128) (124) - (252)
Restructuring costs (5) (29) - (34)
Impairment of assets - (6) - (6)
Melrose equity-settled compensation scheme charges - - (1) (1)
(Losses)/gains in derivatives and associated financial assets and liabilities (20) (6) 258 232
Acquisition and disposal related gains and losses - - 11 11
Net changes in fair value items - 3 - 3
Operating profit/(loss) 367 (6) 239 600
Finance costs (132)
Finance income -
Profit before tax 468
Tax (98)
Profit after tax for the year 370
Year ended 31 December 2024 Engines Airframes Corporate((1)) Total
£m £m £m £m
Adjusted operating profit/(loss) 422 144 (26) 540
Items not included in adjusted operating profit((2)): (131) (124) - (255)
Amortisation of intangible assets acquired in business combinations 7 - (119) (112)
Gains/(losses) in derivatives and associated financial assets and liabilities (15) (75) (21) (111)
Restructuring costs - (43) (1) (44)
Acquisition and disposal related gains and losses - - (14) (14)
Melrose equity-settled compensation scheme charges - (8) - (8)
Net changes in fair value items
Operating profit/(loss) 283 (106) (181) (4)
Finance costs (105)
Finance income 3
Loss before tax (106)
Tax 57
Loss after tax for the year (49)
(1) Corporate adjusted operating loss of £29 million
(2024: £26 million), includes a charge of £2 million (2024: £1 million) in
respect of the Performance Share Plan for certain senior managers in the
Group.
(2) Further details on adjusting items are discussed in
note 4.
c) Segment total assets and liabilities
Total assets Total liabilities
31 December 31 December 31 December 31 December
2025 2024 2025 2024
£m
£m
£m
£m
Engines 4,689 4,595 1,903 1,757
Airframes 2,189 2,284 1,156 1,134
Corporate 718 557 1,710 1,701
Total 7,596 7,436 4,769 4,592
d) Segment capital expenditure and depreciation
Capital expenditure((1)) Depreciation of Depreciation of
owned assets((1))
leased assets
Year ended Year ended Year ended Year ended Year ended Year ended
31 December 31 December 31 December 31 December 31 December 31 December
2025 2024 2025 2024 2025 2024
£m £m £m £m £m £m
Engines 56 63 41 43 11 7
Airframes 39 54 66 74 19 17
Corporate - 1 - - 1 1
Total 95 118 107 117 31 25
(1) Including computer software and development costs. Capital expenditure
excludes lease additions.
e) Geographical information
The Group operates in various geographical areas around the world. The parent
company's country of domicile is the UK and the Group's revenues and
non-current assets in the rest of Europe and North America are also considered
to be material.
The Group's revenue from external customers and information about its segment
assets (non-current assets excluding deferred tax assets,
non-current derivative financial assets, non-current other receivables and
non-current retirement benefit surplus) by geographical location are detailed
below:
Revenue((1)) from Segment assets
external customers
Year ended Year ended 31 December 31 December
31 December 31 December 2025 2024
2025 2024 £m £m
£m £m
UK 574 569 676 739
Rest of Europe 564 567 1,884 2,061
North America 2,349 2,232 1,017 1,145
Other 102 100 39 47
Total 3,589 3,468 3,616 3,992
(1) Revenue is presented by destination.
4. Reconciliation of adjusted profit measures
As described in note 2, adjusted profit measures are an alternative
performance measure used by the Board to monitor the operating performance of
the Group.
a) Operating profit
Notes Year ended Year ended
31 December 31 December
2025 2024
£m £m
Operating profit/(loss) 600 (4)
Amortisation of intangible assets acquired in business combinations a 252 255
Restructuring costs b 34 111
Impairment of assets c 6 -
Melrose equity-settled compensation scheme charges d 1 14
(Gains)/losses in derivatives and associated financial assets and liabilities e (232) 112
Acquisition and disposal related gains and losses f (11) 44
Net changes in fair value items g (3) 8
Total adjustments to operating profit/(loss) 47 544
Adjusted operating profit 647 540
a. The amortisation charge on intangible assets acquired in business
combinations of £252 million (2024: £255 million) is excluded from adjusted
results due to its non-trading nature and to enable comparison with companies
that grow organically. However, where intangible assets are trading in nature,
such as computer software and development costs, the amortisation is not
excluded from adjusted results.
b. Restructuring and other associated costs in the year totalled £34
million (2024: £111 million). These are shown as adjusting items due to their
size and non-trading nature and include a charge of £32 million (2024: £64
million) relating to the completion of significant restructuring projects
across sites in the Engines and Airframes divisions in Europe and North
America. This £32 million charge includes a charge of £8 million to create
an onerous contract provision which is associated with our significant
restructuring projects in Europe in our Airframes division. These projects are
now complete after a cumulative charge since commencement of £313 million (31
December 2024: £281 million). As at 31 December 2025, £5 million is included
in restructuring provisions in relation to these projects.
c. An impairment of property, plant and equipment of £6 million (2024:
£nil) in the Airframes division is connected to our final significant
European restructuring project. This is shown as an adjusting item due to its
non-trading nature.
d. The Melrose equity-settled Employee Share Plan matured during 2024. The
charge of £1 million (2024: £14 million) represents a charge for employer's
tax payable and was excluded from adjusted results due to its size and
volatility.
e. Movements in the fair value of derivative financial instruments
(primarily forward foreign currency exchange contracts where hedge accounting
is not applied) entered into to mitigate the potential volatility of future
cash flows, on long-term foreign currency customer and supplier contracts,
including foreign exchange movements on the associated financial assets and
liabilities are shown as an adjusting item because of volatility and size.
This totalled a credit of £232 million (2024: charge of £112 million) in the
year.
f. Acquisition and disposal related gains of £11 million (2024: net
losses of £44 million) relate to the release of provisions associated with
legacy business disposals that are no longer required. The gain is recorded as
an adjusting item due to its non-trading nature.
g. The net changes in fair value items in the year totalled a credit of
£3 million (2024: charge of £8 million) and are shown as an adjusting item
due to their nature and volatility.
The adjustments to operating profit/(loss) identified above resulted in a net
cash spend of £59 million (2024: £113 million) in the year, being cash costs
associated with restructuring programmes of £31 million (2024: £126
million), £5 million (2024: £nil) of cash costs associated with legacy
Melrose operations, a cash outflow on acquisition and disposal related gains
and losses of £20 million (2024: inflow of £54 million), and cash costs of
the Melrose equity-settled compensation scheme of £3 million (2024: £41
million).
b) Profit before tax
Year ended Year ended
31 December 31 December
2025 2024
£m £m
Profit/(loss) before tax 468 (106)
Adjustments to operating profit/(loss) as above 47 544
Adjusted profit before tax 515 438
c) Profit after tax
Note Year ended Year ended
31 December 31 December
2025 2024
£m £m
Profit/(loss) after tax 370 (49)
Adjustments to profit/(loss) before tax as above 47 544
Tax effect of adjustments to profit/(loss) before tax 5 (7) (128)
Tax effect of significant restructuring 5 - (17)
Total adjustments to profit/(loss) after tax 40 399
Adjusted profit after tax 410 350
5. Tax
Year ended Year ended
31 December 31 December
2025 2024
£m £m
Analysis of tax charge/(credit) in the year:
Current tax
Current year tax charge 17 15
Adjustments in respect of prior years 2 -
Total current tax charge 19 15
Deferred tax 11 (32)
Origination and reversal of temporary differences 4 (9)
Adjustments in respect of prior years 62 (30)
Tax on the change in value of derivative financial instruments - -
Adjustments to deferred tax attributable to changes in tax rates 2 2
Temporary differences not recognised in deferred tax - (3)
Recognition of previously unrecognised deferred tax
Total deferred tax charge/(credit) 79 (72)
Total tax charge/(credit) for the year 98 (57)
£m £m
Analysis of tax charge/(credit) for the year:
Tax charge in respect of adjusted profit before tax 105 88
Tax effect of adjustments to profit/(loss) before tax:
Amortisation of intangible assets acquired in business combinations (59) (59)
Restructuring costs (9) (28)
Gains/losses in derivatives and associated financial assets and liabilities 62 (30)
(2)
Net changes in fair value items 1
-
Impairment of assets (2)
(4)
Acquisition and disposal related gains and losses -
(5)
Melrose equity-settled compensation scheme charges -
(7) (128)
Tax effect of significant restructuring - (17)
Total tax charge/(credit) for the year 98 (57)
The tax charge of £105 million (2024: £88 million) arising on adjusted
profit before tax of £515 million (2024: £438 million) results in an
effective tax rate of 20.4% (2024: 20.1%).
The tax charge/(credit) for the year can be reconciled to the profit/(loss)
before tax per the Income Statement as follows:
Year ended Year ended
31 December 31 December
2025 2024
£m £m
Profit/(loss) before tax 468 (106)
Tax charge/(credit) on profit/(loss) before tax at 24.5% (2024: 25.0%) 115 (27)
Tax effect of:
Disallowable expenses and other permanent differences within adjusted (15) 8
profit((1))
(14) 8
Disallowable expenses and other permanent differences included within
adjusting items((1)) 2 2
Temporary differences not recognised in deferred tax - (3)
Recognition of previously unrecognised deferred tax 4 2
Tax credits and withholding taxes 6 (9)
Adjustments in respect of prior years - (20)
Tax charge classified within adjusting items - -
Effect of changes in tax rates - (18)
Effect of rate differences between UK and overseas rates
Total tax charge/(credit) for the year 98 (57)
(1) Included within permanent differences is the effect of foreign exchange
differences arising as a result of certain entities having a different
reporting functional currency to that required to be used for local statutory
accounts and tax returns.
The reconciliation has been performed at a tax rate of 24.5% (2024: 25.0%).
The reconciliation rate represents the weighted average of the tax rates
applying to profits and losses in the jurisdictions in which those results
arose in the year. However, for 2024 this rate was not representative due to
offsetting profits and losses in the relevant jurisdictions and as such the UK
corporation tax rate was used.
Tax (credits)/charges included in other comprehensive income are as follows:
Year ended Year ended
31 December 31 December
2025 2024
£m £m
Deferred tax movements on retirement benefit obligations (3) 4
Deferred tax movements on hedge relationship gains and losses (6) 1
Total (credit)/charge for the year (9) 5
There is also a tax charge of £2 million (2024: credit of £14 million)
recognised directly in the Statement of Changes in Equity in respect of
deferred tax on equity-settled share-based payments.
6. Dividends
Year ended Year ended
31 December 31 December
2025 2024
£m £m
Interim dividend for the year ended 31 December 2025 of 2.4p 31 -
Final dividend for the year ended 31 December 2024 of 4.0p 51 -
Interim dividend for the year ended 31 December 2024 of 2.0p - 26
Final dividend for the year ended 31 December 2023 of 3.5p - 46
82 72
A final dividend for the year ended 31 December 2025 of 4.8p per share
totalling an expected £60 million is declared by the Board on 27 February
2026 and in accordance with IAS 10: Events after the Reporting Period, has not
been included as a liability in the Consolidated Financial Statements.
On 1 October 2024, the Group commenced a £250 million share buyback programme
which is expected to complete by the end of March 2026. During the year ended
31 December 2025, 31,515,908 shares (2024: 4,173,411 shares) were purchased at
an average price of 551 pence (2024: 484 pence) per share for total
consideration of £173 million (2024: £20 million), inclusive of costs of £1
million (2024: £nil).
During the prior year, the Group completed a £500 million share buyback
programme, which commenced on 2 October 2023, with £411 million of cash spent
in 2024, inclusive of costs of £5 million.
7. Earnings per share
Earnings attributable to owners of the parent Year ended Year ended
31 December 31 December
2025 2024
£m £m
Earnings for basis of earnings per share 370 (49)
Year ended Year ended
31 December 31 December
2025 2024
Number Number
Weighted average number of ordinary shares for the purposes of basic earnings 1,272 1,307
per share (million)
4 17
Further shares for the purposes of diluted earnings per share (million)
Weighted average number of ordinary shares for the purposes of diluted 1,276 1,324
earnings per share (million)
Earnings per share Year ended Year ended
31 December 31 December
2025 2024
pence
pence
Basic earnings per share 29.1 (3.7)
Diluted earnings per share 29.0 (3.7)
Adjusted earnings Year ended Year ended
31 December 31 December
2025 2024
£m £m
Adjusted earnings for the basis of adjusted earnings per share 410 350
Adjusted earnings per share
Adjusted earnings per share Year ended Year ended
31 December 31 December
2025 2024
pence
pence
Adjusted basic earnings per share 32.2 26.8
Adjusted diluted earnings per share 32.1 26.4
8. Trade and other receivables
Current 31 December 31 December
2025 2024
£m £m
Trade receivables 486 407
Allowance for expected credit loss (8) (7)
Other receivables 219 255
Prepayments 32 33
Contract assets 242 261
971 949
Trade receivables are non interest-bearing. Credit terms offered to customers
vary upon the country of operation but are generally between 30 and 90 days.
Non-current 31 December 31 December
2025 2024
£m £m
Other receivables 36 8
Contract assets 1,490 1,193
1,526 1,201
The Group's contract assets comprise the following:
Participation fees Unbilled receivables Unbilled Other Total
£m £m work done £m £m
£m
At 1 January 2024 176 206 595 61 1,038
Additions 8 1,016 298 5 1,327
Utilised (11) (935) (24) (1) (971)
Settlements((1)) - - 35 - 35
Exchange adjustments 3 4 18 - 25
At 31 December 2024 176 291 922 65 1,454
Reclassifications((2)) - - 143 - 143
352
1,403
Additions - 1,048
3
(28)
(1,155)
Utilised (11) (1,101)
(15)
(81)
(113)
Exchange adjustments (12) (16) (4)
At 31 December 2025 153 222 1,308 49 1,732
(1) Settlements principally relate to the utilisation of provision balances
held as commercial matters are resolved.
(2) Reclassification of the specific liability relating to the PW1100G powder
metal issue ("PMI") to contract liabilities (see note 9).
Risk and revenue sharing partnerships
The amount of revenue recognised from RRSP contracts during the year was £996
million (2024: £859 million), which included an increase in the unbilled work
done contract asset of £324 million (2024: £274 million). Within this, there
is revenue from the delivery of product which is recognised at a point in time
of £930 million (2024: £802 million) and revenue from provision of service
which is recognised over time of £66 million (2024: £57 million). Due to the
nature of certain of these RRSP arrangements, there is an associated unbilled
work done contract asset.
During the year, £80 million (2024: £50 million) of revenue has been
recognised relating to performance obligations satisfied by the Group in
previous years as risks have reduced and the constraint reassessed. There has
been a further £36 million (2024: £41 million) of revenue recognised from
changes in assumptions which will also impact the revenue allocation between
future years. Assumption changes were made following operational progress by
engine manufacturers with their customers, providing more certainty over
future costs and volumes for the RRSP partners.
9. Trade and other payables
Current 31 December 31 December
2025 2024
£m £m
Trade payables 627 580
Other payables 94 81
Customer advances and contract liabilities 460 509
Other taxes and social security 60 51
Government refundable advances 6 6
Funded development costs 64 80
Accruals 220 190
Deferred government grants 13 13
1,544 1,510
Non-current 31 December 31 December
2025 2024
£m £m
Other payables 44 51
Customer advances and contract liabilities 376 316
Other taxes and social security - 2
Government refundable advances 40 45
Funded development costs 45 17
Accruals 11 18
Deferred government grants 17 20
533 469
The Group's customer advances and contract liabilities comprise the following:
31 December 31 December
2025 2024
£m £m
Customer cash advances 281 211
Material rights given 12 23
RRSP related obligations 543 591
836 825
RRSP related obligations at 31 December 2025 includes £66 million (31
December 2024: £143 million, recorded within unbilled work done) relating to
the PW1100G powder metal issue ("PMI") which has been reclassified from
unbilled work done, a contract asset category, during the year. The movement
during the year includes settlements of £68 million (2024: £35 million).
10. Provisions
Loss-making Property Environmental and litigation Warranty Restructuring Other Total
contracts related costs £m related costs £m £m £m
£m £m £m
At 1 January 2025 28 25 50 24 27 30 184
Utilised (11) - (6) (2) (36) (4) (59)
Charge to operating profit((1)) 17 10 10 2 24 3 66
Release to operating profit((2)) (3) (4) (10) (4) (1) (18) (40)
(1)
(1)
(4)
Exchange adjustments - (1) - (1)
At 31 December 2025 31 30 43 19 14 10 147
Current 14 4 24 6 12 4 64
Non-current 17 26 19 13 2 6 83
31 30 43 19 14 10 147
(1) Includes £46 million of adjusting items and £20 million recognised in
adjusted operating profit.
(2) Includes £20 million of adjusting items and £20 million recognised in
adjusted operating profit.
Loss-making contracts
Provisions for loss-making contracts are considered to exist where the Group
has a contract under which the unavoidable costs of meeting the obligations
exceed the economic benefits expected to be received under it. This obligation
has been discounted and will be utilised over the period of the respective
contracts, which is up to 15 years.
Calculation of loss-making contract provisions is based on contract
documentation and delivery expectations, along with an estimate of directly
attributable costs and represents management's best estimate of the
unavoidable costs of fulfilling the contract.
Utilisation during the year of £11 million (2024: £23 million) has
benefitted adjusted operating profit. In addition, £14 million (2024: £12
million) has been charged on a net basis, of which £16 million (2024: £10
million) is shown as an adjusting item.
Property related costs
The provision for property related costs represents dilapidation costs for
ongoing leases and is expected to result in cash expenditure over the next 15
years. Calculations of dilapidation obligations are based on lease agreements
with landlords and external quotes, or in the absence of specific
documentation, management's best estimate of the costs required to fulfil
obligations.
Environmental and litigation
There are environmental provisions amounting to £11 million (31 December
2024: £8 million) relating to the estimated remediation costs of pollution,
soil and groundwater contamination at certain sites and estimated future costs
and settlements in relation to legal claims and associated insurance
obligations amounting to £32 million (31 December 2024: £42 million).
Liabilities for environmental costs are recognised when environmental
assessments are probable and the associated costs can be reasonably estimated.
The Group has on occasion been required to take legal or other actions to
defend itself against proceedings brought by other parties. Provisions are
made for the expected costs associated with such matters, based on past
experience of similar items and other known factors, considering professional
advice received. This represents management's best estimate of the likely
outcome. The timing of utilisation of these provisions is uncertain,
reflecting the complexity of issues and the outcome of various court
proceedings and negotiations. Contractual and other provisions represent
management's best estimate of the cost of settling future obligations and
reflect management's assessment of the likely settlement method, which may
change over time. However, no provision is made for proceedings which have
been, or might be, brought by other parties against Group companies unless
management, considering professional advice received, assess that it is more
likely than not that such proceedings may be successful.
Warranty related costs
Provisions for the expected cost of warranty obligations under local sale of
goods legislation are recognised at the date of sale of the relevant products
and subsequently updated for changes in estimates as necessary. The provision
for warranty related costs represents the best estimate of the expenditure
required to settle the Group's obligations, based on past experience, recent
claims and current estimates of costs relating to specific claims. Warranty
terms are, on average, between one and five years.
Restructuring
Restructuring provisions relate to committed costs in respect of restructuring
programmes, as described in note 4, usually resulting in cash spend within one
to two years. A restructuring provision is recognised when the Group has
developed a detailed formal plan for the restructuring and has raised a valid
expectation in those affected that it will carry out the restructuring by
either starting to implement the plan or by announcing its main features to
those affected by it. The measurement of a restructuring provision includes
only the direct expenditures arising from the restructuring, which are those
amounts that are necessarily entailed by the restructuring programmes.
Other
Other provisions include indemnities and the employer tax on equity-settled
incentive schemes which are expected to result in cash expenditure during the
next three years.
Where appropriate, provisions have been discounted using discount rates
between 0% and 4% (31 December 2024: 0% and 5%) depending on the territory in
which the provision resides and the length of its expected utilisation.
11. Retirement benefit obligations
Defined benefit plans
The Group sponsors defined benefit plans for qualifying employees of certain
subsidiaries. The funded defined benefit plans are administered by separate
funds that are legally separated from the Group. The Trustees of the funds are
required by law to act in the interest of the fund and of all relevant
stakeholders in the plans. The Trustees of the pension funds are responsible
for the investment policy with regard to the assets of the fund.
Contributions
The Group contributed £22 million (2024: £20 million) to defined benefit
pension plans and post-employment plans in the year ended 31 December 2025.
The Group expects to contribute approximately £20 million in 2026.
Actuarial assumptions
The major assumptions used by the actuaries in calculating the Group's pension
liabilities are as set out below:
Rate of increase Discount rate Price inflation
of pensions in payment
% (RPI/CPI)
% per annum
%
31 December 2025
GKN Group Pension Scheme (Number 1) 2.5 5.6 2.8/2.4
31 December 2024
GKN Group Pension Schemes (Numbers 1 and 4) 2.7 5.5 3.0/2.6
GKN US plans n/a 5.5 n/a
Balance Sheet disclosures
The amounts recognised in the Consolidated Balance Sheet in respect of defined
benefit plans were as follows:
31 December 31 December
2025 2024
£m £m
Present value of funded defined benefit obligations (577) (1,022)
Fair value of plan assets 579 986
Funded status 2 (36)
Present value of unfunded defined benefit obligations (29) (23)
Net liabilities (27) (59)
Analysed as: 2 -
Retirement benefit surplus (29) (59)
Retirement benefit obligations
Net liabilities (27) (59)
The plan assets and liabilities at 31 December 2025 were as follows:
UK Other Total
Plans
Plans((1))
£m
£m
£m
Plan assets 579 - 579
Plan liabilities (583) (23) (606)
Net liabilities (4) (23) (27)
(1) Includes a liability in respect of the GKN post-employment medical plans
of £6 million and a surplus in respect of the GKN Group Pension Scheme
(Number 1) of £2 million.
12. Cash flow statement
Notes Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Reconciliation of operating profit/(loss) to net cash from/(used in) operating
activities
Operating profit/(loss) 600 (4)
Adjusting items((1)) 4 47 544
Adjusted operating profit 4 647 540
Adjustments for:
Depreciation of property, plant and equipment 104 101
Amortisation of computer software and development costs 34 41
Restructuring costs paid and movements in provisions (53) (135)
Defined benefit pension contributions paid (22) (20)
Change in inventories (32) (71)
Change in receivables((2)) (347) (449)
Change in payables 20 191
Tax paid (12) (10)
Interest paid on loans and borrowings (103) (84)
Interest paid on lease obligations (12) (6)
Acquisition and disposal costs - (1)
Divisional management incentive scheme related payments (7) (20)
Melrose equity-settled compensation scheme related payments (3) (198)
Net cash from/(used in) operating activities 214 (121)
(1) The cash impact of adjusting items is detailed in note 4.
(2) Change in receivables includes increases to unbilled
work done contract assets of £324 million (2024: £309 million).
Reconciliation of cash and cash equivalents, net of bank overdrafts 31 December 31 December
2025
2024
£m
£m
Cash and cash equivalents per Balance Sheet 166 88
Bank overdrafts included within current interest-bearing loans and borrowings (12) (8)
Cash and cash equivalents, net of bank overdrafts per Statement of Cash Flows 154 80
Net debt reconciliation
Net debt consists of interest-bearing loans and borrowings and cash and
cash equivalents.
Net debt is considered to be an alternative performance measure as it is not
defined in IFRS. The most directly comparable IFRS measure is the aggregate of
interest-bearing loans and borrowings (current and non-current) and cash and
cash equivalents. A reconciliation from the most directly comparable IFRS
measure to net debt, used as a basis for banking covenant calculations, is
given below:
31 December 31 December
2025
2024
£m
£m
Interest-bearing loans and borrowings - due within one year (60) (8)
Interest-bearing loans and borrowings - due after one year (1,513) (1,401)
External debt (1,573) (1,409)
Less:
Cash and cash equivalents 166 88
Net debt (1,407) (1,321)
The table below shows the key components of the movement in net debt:
At Cash flow Acquisitions Other non-cash movements Effect of foreign exchange At
1 January
£m
and disposals
£m
£m
31 December
2025
£m
2025
£m
£m
External debt (excluding bank overdrafts and unamortised finance costs) (1,408) (229) - - 74 (1,563)
Unamortised finance costs 7 1 - (6) - 2
External debt (excluding bank overdrafts) (1,401) (228) - (6) 74 (1,561)
Cash and cash equivalents, net of bank overdrafts 80 90 (16) - - 154
Net debt (1,321) (138) (16) (6) 74 (1,407)
Glossary
Alternative Performance Measures ("APMs")
In accordance with the Guidelines on APMs issued by the European Securities
and Markets Authority ("ESMA"), additional information is provided on the APMs
used by the Group below.
In the reporting of financial information, the Group uses certain measures
that are not required under IFRS. These additional measures (commonly referred
to as APMs) provide additional information on the performance of the business
and trends to stakeholders. These measures are consistent with those used
internally, and are considered important to understanding the financial
performance and financial health of the Group. APMs are considered to be an
important measure to monitor how the Group is performing because this provides
a meaningful comparison of how the Group is managed and measured on a
day-to-day basis and achieves consistency and comparability between reporting
periods.
These APMs may not be directly comparable with similarly titled measures
reported by other companies and they are not intended to be a substitute for,
or superior to, IFRS measures. All results arise from continuing operations.
Income Statement measures
APM
Adjusting items
Closest equivalent statutory measure
None
Reconciling items to statutory measure
Adjusting items (note 4)
Definition and purpose
Those items which the Group excludes from its adjusted profit metrics in order
to present a further measure of the Group's performance.
These include items which are significant in size or volatility, or by nature
are non-trading or non-recurring or the net change in fair value items booked
on an acquisition.
This provides a meaningful comparison of how the business is managed and
measured on a day-to-day basis and provides consistency and comparability
between reporting periods.
APM
Adjusted operating profit
Closest equivalent statutory measure
Operating profit/(loss)((1))
Reconciling items to statutory measure
Adjusting items (note 4)
Definition and purpose
The Group uses adjusted profit measures to provide a useful and more
comparable measure of the ongoing performance of the Group. Adjusted measures
are reconciled to statutory measures by removing adjusting items, the nature
of which are disclosed above and further detailed in note 4.
Adjusted operating profit Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Operating profit/(loss) 600 (4)
Adjusting items to operating profit/(loss) (note 4) 47 544
Adjusted operating profit 647 540
APM
Adjusted operating margin
Closest equivalent statutory measure
Operating margin((2))
Reconciling items to statutory measure
Adjusting items (note 4)
Definition and purpose
Adjusted operating margin represents Adjusted operating profit as a percentage
of revenue. The Group uses adjusted profit measures to provide a useful and
more comparable measure of the ongoing performance of the Group.
APM
Adjusted profit before tax
Closest equivalent statutory measure
Profit/(loss) before tax
Reconciling items to statutory measure
Adjusting items (note 4)
Definition and purpose
Profit/(loss) before the impact of adjusting items and tax. As discussed
above, adjusted profit measures are used to provide a useful and more
comparable measure of the ongoing performance of the Group. Adjusted measures
are reconciled to statutory measures by removing adjusting items, the nature
of which are disclosed above and further detailed in note 4.
Adjusted profit before tax Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Profit/(loss) before tax 468 (106)
Adjusting items to profit/(loss) before tax (note 4) 47 544
Adjusted profit before tax 515 438
APM
Adjusted profit after tax
Closest equivalent statutory measure
Profit/(loss) after tax
Reconciling items to statutory measure
Adjusting items (note 4)
Definition and purpose
Profit/(loss) after tax but before the impact of adjusting items. As discussed
above, adjusted profit measures are used to provide a useful and more
comparable measure of the ongoing performance of the Group. Adjusted measures
are reconciled to statutory measures by removing adjusting items, the nature
of which are disclosed above and further detailed in note 4.
Adjusted profit after tax Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Profit/(loss) after tax 370 (49)
Adjusting items to profit/(loss) after tax (note 4) 40 399
Adjusted profit after tax 410 350
APM
Constant currency
Closest equivalent statutory measure
Income Statement, which is reported using actual average foreign exchange
rates
Reconciling items to statutory measure
Constant currency foreign exchange rates
Definition and purpose
The Group uses Sterling based constant currency models to measure performance.
These are calculated by applying 2025 average exchange rates to local currency
reported results for the current and prior year. This gives a Sterling
denominated Income Statement which excludes any variances attributable to
foreign exchange rate movements.
APM
Adjusted EBITDA and Adjusted EBITDA for banking covenant leverage purposes
Closest equivalent statutory measure
Operating profit/(loss)((1))
Reconciling items to statutory measure
Adjusting items (note 4), depreciation of property, plant and equipment and
amortisation of computer software and development costs. Adjusted EBITDA for
banking covenant leverage purposes also includes an imputed lease charge and
other adjustments required for banking covenant leverage purposes((3))
Definition and purpose
Adjusted operating profit for 12 months prior to the reporting date, before
depreciation of property, plant and equipment and before the amortisation of
computer software and development costs.
Adjusted EBITDA and Adjusted EBITDA for banking covenant leverage purposes are
measures used by external stakeholders to measure performance.
Adjusted EBITDA and Adjusted EBITDA for banking covenant leverage purposes Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Adjusted operating profit 647 540
Depreciation of property, plant and equipment and amortisation of computer 138 142
software and development costs
Adjusted EBITDA 785 682
Imputed lease charge (43) (38)
Other adjustments required for banking covenant leverage purposes((3)) - (15)
Adjusted EBITDA for banking covenant leverage purposes 742 629
APM
Adjusted tax rate
Closest equivalent statutory measure
Effective tax rate
Reconciling items to statutory measure
Adjusting items, adjusting tax items and the tax impact of adjusting items
(note 4 and note 5)
Definition and purpose
The income tax charge for the Group excluding adjusting tax items, and the tax
impact of adjusting items, divided by adjusted profit before tax.
This measure is a useful indicator of the ongoing tax rate for the Group.
Adjusted tax rate Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Tax (charge)/credit per Income Statement (98) 57
Adjusted for:
Tax impact of adjusting items (note 4) (7) (128)
Tax impact of significant restructuring - (17)
Adjusted tax charge (105) (88)
Adjusted profit before tax 515 438
Adjusted tax rate 20.4% 20.1%
APM
Adjusted basic earnings per share
Closest equivalent statutory measure
Basic earnings per share
Reconciling items to statutory measure
Adjusting items (note 4 and note 7)
Definition and purpose
Profit/(loss) after tax attributable to owners of the parent before the impact
of adjusting items, divided by the weighted average number of ordinary shares
in issue during the financial year.
The Board considers this to be a key measure of performance when all
businesses are held for the complete reporting period.
APM
Adjusted diluted earnings per share
Closest equivalent statutory measure
Diluted earnings per share
Reconciling items to statutory measure
Adjusting items (note 4 and note 7)
Definition and purpose
Profit/(loss) after tax attributable to owners of the parent before the impact
of adjusting items, divided by the weighted average number of ordinary shares
in issue during the financial year adjusted for the effects of any potentially
dilutive options.
The Board considers this to be a key measure of performance when all
businesses are held for the complete reporting period.
APM
Interest cover
Closest equivalent statutory measure
None
Reconciling items to statutory measure
Not applicable
Definition and purpose
Adjusted EBITDA calculated for banking covenant leverage purposes (including
adjusted EBITDA from businesses disposed) as a multiple of net interest
payable on bank loans and overdrafts and factoring facilities.
This measure is used for bank covenant testing.
Interest cover Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Adjusted EBITDA for banking covenant leverage purposes 742 629
Adjusted EBITDA from businesses disposed in the year - 20
Adjusted EBITDA for interest cover 742 649
Interest on bank loans and overdrafts 90 75
Interest on factoring facilities 17 16
Finance income - (3)
Net finance charges for covenant purposes 107 88
Interest cover 6.9x 7.4x
Balance Sheet measures
APM
Working capital
Closest equivalent statutory measure
Inventories, trade and other receivables less trade and other payables
Reconciling items to statutory measure
Not applicable
Definition and purpose
Working capital comprises inventories, current trade and other receivables,
non-current other receivables, current trade and other payables and
non-current other payables.
This measure provides additional information in respect of working capital
management.
APM
Net debt
Closest equivalent statutory measure
Cash and cash equivalents less interest-bearing loans and borrowings
Reconciling items to statutory measure
Reconciliation of net debt (note 12)
Definition and purpose
Net debt comprises cash and cash equivalents and interest-bearing loans and
borrowings.
Net debt is one measure that could be used to indicate the strength of the
Group's Balance Sheet position and is a useful measure of the indebtedness of
the Group.
APM
Bank covenant definition of net debt at average rates and banking covenant
leverage
Closest equivalent statutory measure
Cash and cash equivalents less interest-bearing loans and borrowings
Reconciling items to statutory measure
Impact of foreign exchange
Definition and purpose
Net debt (as above) is presented in the Balance Sheet translated at year end
exchange rates.
For bank covenant testing purposes net debt is converted using average
exchange rates for the previous 12 months.
Banking covenant leverage is calculated as the bank covenant definition of net
debt divided by adjusted EBITDA for banking covenant leverage purposes. This
measure is used for bank covenant testing.
Bank covenant definition of net debt at average rates and banking covenant 31 December 31 December
leverage
2025 2024
£m
£m
Net debt at closing rates (note 12) 1,407 1,321
Impact of foreign exchange 22 (16)
Bank covenant definition of net debt at average rates 1,429 1,305
Banking covenant leverage 1.9x 2.1x
APM
Leverage
Closest equivalent statutory measure
None
Reconciling items to statutory measure
None
Definition and purpose
Leverage is calculated as the bank covenant definition of net debt at average
rates (as above) divided by adjusted EBITDA.
This measure is used by external stakeholders to assess the financial
stability of the Group.
Leverage 31 December 31 December
2025 2024
£m
£m
Leverage 1.8x 1.9x
Cash Flow measures
APM
Adjusted operating cash flow (pre-capex)
Closest equivalent statutory measure
Net cash from/(used in) operating activities
Reconciling items to statutory measure
Non-working capital items (note 12) and the payment of principal under lease
obligations
Definition and purpose
Adjusted operating cash flow (pre-capex) is calculated as net cash from
operating activities before restructuring costs paid and movements in
provisions, defined benefit pension contributions paid, tax paid, interest
paid on loans and borrowings, interest paid on lease obligations, acquisition
and disposal costs, divisional management incentive scheme related payments,
Melrose equity-settled compensation scheme related payments and the payment of
principal under lease obligations.
This measure provides additional useful information in respect of cash
generation and is consistent with how business performance is
measured internally.
Adjusted operating cash flow (pre-capex) Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Net cash from/(used in) operating activities 214 (121)
Operating activities:
Restructuring costs paid and movements in provisions((4)) 42 112
Defined benefit pension contributions paid 22 20
Tax paid 12 10
Interest paid on loans and borrowings 103 84
Interest paid on lease obligations 12 6
Acquisition and disposal costs - 1
Divisional management incentive scheme related payments 7 20
Melrose equity-settled compensation scheme related payments 3 198
Debt related:
Payment of principal under lease obligations (31) (32)
Adjusted operating cash flow (pre-capex) 384 298
APM
Free cash flow
Closest equivalent statutory measure
Net increase in cash and cash equivalents (net of bank overdrafts)
Reconciling items to statutory measure
Acquisition and disposal related cash flows, dividends paid to owners of the
parent, transactions in own shares, payments made in respect of equity-settled
compensation schemes and movements on borrowing facilities
Definition and purpose
Free cash flow represents cash generated after all trading costs including
restructuring, pension contributions, tax and interest payments.
This measure provides additional useful information in respect of cash
generation and is consistent with how business performance is
measured internally.
Free cash flow Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Net increase in cash and cash equivalents (net of bank overdrafts) 74 30
Debt related:
Repayment of borrowings - 10
Drawings on borrowing facilities (229) (767)
Costs of raising debt finance 1 3
Equity related:
Dividends paid to owners of the parent 82 72
Purchase of own shares, including associated costs 173 431
Melrose equity-settled compensation scheme related payments 3 198
Acquisition and disposal related:
Disposal of businesses, net of cash disposed 20 (55)
Acquisition of subsidiaries, net of cash acquired 5 -
Equity accounted investment additions - 3
Disposal of investments (9) -
Acquisition and disposal costs - 1
Other 5 -
Free cash flow 125 (74)
APM
Free cash flow pre-interest and tax
Closest equivalent statutory measure
Net increase in cash and cash equivalents (net of bank overdrafts)
Reconciling items to statutory measure
Free cash flow, as defined above, adjusted for interest and tax cash flows
Definition and purpose
Free cash flow pre-interest and tax represents free cash flow adjusted for
interest and tax.
This measure provides additional useful information in respect of cash
generation and is consistent with how business performance is
measured internally.
Free cash flow pre-interest and tax Year ended Year ended
31 December
31 December
2025 2024
£m
£m
Free cash flow 125 (74)
Tax paid 12 10
Interest paid on loans and borrowings 103 84
Interest paid on lease obligations 12 6
Interest received - (3)
Free cash flow pre-interest and tax 252 23
APM
Capital expenditure (capex)
Closest equivalent statutory measure
None
Reconciling items to statutory measure
Not applicable
Definition and purpose
Calculated as the purchase of owned property, plant and equipment and computer
software and expenditure on capitalised development costs during the year,
excluding any assets acquired as part of a business combination.
APM
Capital expenditure to depreciation ratio
Closest equivalent statutory measure
None
Reconciling items to statutory measure
Not applicable
Definition and purpose
Capital expenditure divided by depreciation of owned property, plant and
equipment and amortisation of computer software and development costs.
APM
Dividend per share
Closest equivalent statutory measure
Dividend per share
Reconciling items to statutory measure
Not applicable
Definition and purpose
Amounts payable by way of dividends in terms of pence per share.
(1) Operating profit/(loss) is not defined within IFRS but is a widely
accepted profit measure being profit/(loss) before finance costs, finance
income and tax.
(2) Operating margin is not defined within IFRS but is a widely accepted
profit measure being derived from operating profit/(loss)((1)) divided by
revenue.
(3) Included within other adjustments required for banking covenant leverage
purposes in the year ended 31 December 2025 are unrealised annual savings from
spend incurred in the year on restructuring projects of £nil (2024: £5
million) offset by the elimination of EBITDA from sites disposed in the year
of £nil (2024: £20 million).
(4) Excludes non-cash utilisation of loss-making
contract provisions of £11 million (2024: £23 million).
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