REG - Melrose Industries - Half Year Results
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RNS Number : 5069T Melrose Industries PLC 01 August 2025
1 August 2025
MELROSE INDUSTRIES PLC
UNAUDITED RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2025
Strong first half performance and focused execution
Melrose Industries PLC ("Melrose", the "Company" or the "Group"), a
world-leading global aerospace and defence business, today announces its
interim results for the six months ended 30 June 2025 (the "Period").
Group highlights
· Strong first half performance with revenue growth of 6% on a
like-for-like basis and adjusted operating profit(1) up 29%(2) versus the
comparative period
· Adjusted operating margin(1) at 18.0%, up 380bps versus prior year
with good progression in both divisions
· Continued strong execution and commercial progress despite supply
chain and tariff disruption
· Multi-year transformation programme nearing completion, a key
driver of margin expansion
· Improvement of £91 million in free cash flow versus the
comparative period; on track to deliver £100+ million of free cash flow in
2025
· Guidance for the full year unchanged on a constant currency basis
Adjusted(1) results Growth(2) Statutory results
2025 2024 2025 2024
Continuing operations £m £m £m £m
Revenue 1,720 1,742 6% 1,720 1,742
Operating profit/(loss) (post-PLC costs(3)) 310 247 29% 441 (62)
Operating margin 18.0% 14.2% 380bps
Profit/(loss) before tax 248 204 24% 379 (105)
Diluted earnings per share (p) 15.1p 11.9p 30% 22.2p (6.1p)
Dividend per share (p) 2.4p 2.0p 20% 2.4p 2.0p
Free cash flow(1) (54) (145) +£91m n/a n/a
Net debt(1) 1,404 1,321 n/a n/a
Leverage(1) 2.0x 1.9x n/a n/a
Net debt and leverage comparative information as at 31 December 2024
Peter Dilnot, Chief Executive Officer of Melrose Industries PLC, today said:
"We delivered a strong performance in the first half with a 29% improvement in
profit and cash flow significantly stronger than last year despite the
backdrop of supply chain and tariff disruptions. Our multi-year transformation
programme will be completed by year end and the benefits are already reading
through with more to come. We have a clear strategy underpinned by
attractive aerospace and defence markets, differentiated technology and
established positions on the world's leading civil and defence aircraft. We
are confident about delivering sustained increases in profit and cash flow in
the years ahead and our free cash flow target of £600 million in 2029."
Financial highlights(2)
· Revenue of £1,720 million, 6% growth on the prior year on a
like-for-like basis (1% including exited businesses)
· Statutory operating profit of £441 million (2024: loss of £62
million) including gains on foreign exchange derivative contracts
· Successful in largely mitigating the direct impact of current
tariffs
· Free cash outflow improved by £91 million to £54 million (2024:
£145 million outflow) largely driven by higher earnings and lower
restructuring costs
· Adjusted diluted EPS(1) of 15.1p compared to 11.9p in 2024
representing growth of 30%. Statutory diluted EPS of 22.2p (2024: loss of
6.1p)
· Net debt(1) of £1,404 million, representing leverage(1) of 2.0x,
after funding growth and £71 million of share buybacks in 2025 (£91 million
of current £250 million buyback programme completed)
· Continued dividend growth, with an interim dividend of 2.4 pence
per share declared, an increase of 20% on the prior year
Divisional highlights(2)
Engines
· Engines revenue growth of 11% to £781 million with adjusted
operating profit(1) up 26% to £261 million primarily driven by our leading
risk and revenue sharing partnerships (RRSP) portfolio
· Engines adjusted operating margin(1) of 33.4%, 400bps higher than
the comparative period driven by revenue growth and favourable mix
· Adjusted operating profit(1) included £182 million (2024: £160
million) of variable consideration from RRSP contracts
· Five-year contract extension with Pratt & Whitney to support
critical fan blade repairs with new San Diego facility fully operational
· Continued strong progress in additive fabrication, with 100%
serial production on the Fan Case Mount Ring for the PW1500G expected by the
end of 2025
· Deepened relationship with the Swedish Defence Administration
(FMV), with investment in engine assembly, test and MRO repair capabilities
for the RM16 engine
Structures
· Structures revenue growth of 3% to £939 million (7% lower
including businesses exited in 2024) reflecting good growth in Defence
partially offset by Civil where revenue was flat, as expected
· Structures delivered 32% growth in adjusted operating profit(1)
to £63 million as a result of revenue growth, business improvement actions
and operational efficiencies
· Adjusted operating margin up 200bps at 6.7%
· Defence performing strongly driven by operational improvements;
good progress in portfolio repricing, meeting our year-end target six months
ahead of schedule
· Six-year contract extension signed with BAE Systems for canopies
on the Typhoon; and five-year contract signed with Lockheed Martin for C-130J
nacelles
· Agreement with Archer to further expand engagement in the
'Midnight' electric platform following our capital-light approach to
investment
· Restructuring programme nearing completion with full benefits
expected in 2026 and beyond
Governance
· Further to his appointment as Non-executive Director and Chair
designate on 1 October 2024, on 30 March 2025, Chris Grigg took over as
Non-executive Chairman of the Board
· On 19 May 2025, Alison Goligher was appointed to the Board as
Non-executive Director and Chair of the Remuneration Committee
Guidance for 2025 full year(4)
On a constant currency basis, our guidance for the full year is unchanged.
Given the strengthening of sterling against the US dollar we are updating our
guidance to reflect an average exchange rate of GBP £ = US $1.335 (previously
$1.25), representing a movement of 7%:
· Guidance continues to exclude the direct and indirect impact of any
new or changed tariffs
· Revenue between £3,425 million and £3,575 million (previously
£3,550 million to £3,700 million)
· Adjusted operating profit (post PLC costs) of between £620 million
to £650 million (previously £650 million to £690 million)
· Variable consideration of between £310 million and £340 million
(previously £320 million to £360 million)
· Free cash flow after interest and tax remains unchanged at £100+
million
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)
Audience Webcast link
https://streamstudio.world-television.com/1006-1475-41983/en
(https://streamstudio.world-television.com/1006-1475-41983/en)
Conference Call Details - 9.30am, Friday 1 August
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 808 189 0158
Global Dial-In Numbers
(https://www.netroadshow.com/conferencing/global-numbers?confId=78039)
Access Code: 614139
(Melrose Industries PLC)
(Melrose is an industry-leading global aerospace and defence 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 Structures, 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. Described in the glossary to the Interim Announcement and considered
by the Board to be a key measure of performance)
(2. Like-for-like growth is calculated at constant currency against 2024
results and, for revenue, excludes exited businesses)
(3. PLC costs are also referred to as corporate costs)
(4. Assuming US$ = 1.335 average exchange rate)
CHIEF EXECUTIVE OFFICER'S REVIEW
INTRODUCTION
Melrose has a clear path to value creation and we are executing our plan. In
the first half of 2025 we delivered a strong performance despite the backdrop
of supply chain challenges and tariff disruption. All our end markets continue
to grow structurally with rapidly increasing demand in defence. Our unique
design-led portfolio effectively locks in growth through our established OE
and aftermarket positions. We are also making great progress with
commercialising our technology with new target opportunities, while
contributing to the next generation of flight.
In the first half, our operating profit increased by 29% driven by underlying
revenue growth, positive aftermarket mix and our improvement actions reading
through. Our teams have continued to execute strongly, including navigating
the additional complexity created by the introduction of US tariffs at the
start of the second quarter. Our free cash flow was £91 million better than
the comparative period primarily due to increasing earnings and lower
restructuring costs. We are very confident of significant positive cash inflow
in the second half and delivering our full year free cash flow guidance of
£100+ million. Our multi-year transformation programme will also be completed
by the end of this year as planned.
Going forward, our strategy provides 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. We have repositioned Melrose as a design-led Tier 1 business with
embedded technology in the world's leading aircraft, so we are well placed to
benefit from growing structural demand.
The most significant contributor to future Melrose value is profitably
capturing the growth from our established positions across civil and defence
platforms, as production ramps and the aftermarket reads through. This is
augmented by our ongoing expansion in attractive target opportunities such as
commercialising our breakthrough proprietary additive fabrication technology
in Engines and developing unmanned defence air vehicles in Structures. Beyond
these, we continue to position for the longer-term with partnerships working
on the next generation of single aisle engines and airframes, 6(th) generation
fighters, and electric flight.
Looking ahead, we are very well placed to deliver further growth in profit and
accelerating cash flow. Although supply constraints may persist, there are
record customer order backlogs and OEM production will ramp up to meet this
demand in the years ahead. Civil flight hours are set to continue to grow over
the medium-term which will generate increasing aftermarket cashflows. In
parallel, there is increasing demand for existing defence platforms and we are
actively involved in rapid development of new platforms. We have positive
momentum, a clear strategy and excellent growth opportunities ahead.
FIRST HALF 2025 RESULTS(2)
Group revenue rose 6% in the first half to £1,720 million. This comprised
strong Engines growth of 11%, driven primarily by our RRSP portfolio, and
Structures growth of 3%, reflecting a good Defence performance. The weakening
of the dollar against sterling reduced revenue and adjusted operating profit
by £32 million and £8 million respectively versus the comparative period.
There was a 29% increase in adjusted operating profit to £310 million, with
margins up 380bps to 18.0% driven by sales growth and business and operational
improvements. Our net debt position was in line with our expectations at
£1,404 million, representing a leverage ratio of 2.0x, after funding growth,
ongoing restructuring and share buybacks.
Across the Group, we made significant operational gains, reinforcing safety
and quality as top priorities. On safety, our Total Incident Rate ('TIR') was
14% lower than the same period in 2024, while quality 'escapes' were down by
22%. Quality improvements not only strengthened customer relationships but
also drove a number of efficiency savings versus the comparative period. These
gains reflect the traction we are seeing with our lean operating model,
'Brilliant Basics', which is creating a strong culture of continuous
improvement throughout Melrose.
Our multi-year restructuring programme is nearing completion with payment of
final costs planned for the second half. This programme has significantly
streamlined our global footprint through the exit of non-core and, in some
cases, loss-making business and represents a key driver of margin expansion.
In Defence, we have met our year-end target to reprice 85% of the portfolio
six months ahead of plan.
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 Period, we made good progress in all areas of our growth strategy.
In Engines, we had continued success in our breakthrough proprietary additive
fabrication technology, where demand remains strong, with new orders signed
and multiple requests from customers. This builds on our long-term
partnerships with both Pratt & Whitney and GE Aerospace. In June, we
announced a major milestone on the Fan Case Mount Ring on the PW1500G with the
transition from initial production phase to 100% serial production by end of
2025. This reinforces our position as the only supplier to have a certified
additively fabricated part flying today. We are a proud RRSP partner in the
GTF programme and the recently certified Advantage variant (the upgrade to the
base Pratt & Whitney GTF engine), which has further improved the
efficiency of the geared turbofan engine, powering the E2, A320neo and A220
families and supporting airlines globally. Our Engines repairs business
secured contracts from existing OEMs, including a five-year contract extension
with Pratt & Whitney for critical fan blades, and a three-year defence
contract for fan blade repairs for Boeing on the C-17 Globemaster.
In Structures, we announced several new contract wins. On the Civil side, we
signed an agreement with Archer expanding the scope of our involvement on the
'Midnight' platform demonstrating our joint goals of advancing sustainable
electric flight, as we transition towards certification and industrialisation
of this new market area. In Defence, which accounts for 34% of Structures
revenue, we signed a five-year contract with Lockheed Martin through to the
end of 2029 for continued manufacture of C-130J nacelles. We also signed a
six-year follow-on contract with BAE Systems for continued manufacture of
Typhoon canopies through to the end of 2030, in support of European defence
growth.
Looking further ahead, Engines is the only strategic partner on both future
engine development programmes: the CFMI RISE and Pratt & Whitney's
next-generation GTF. Within RISE, our work is focused on additive
fabrication capability, while our core input in the future GTF is around our
leadership in complex load-bearing structures. During the Period we continued
to support these programmes including demand for more components. In Defence,
where global spending is set to increase substantially over the coming years,
the strength of our technology positions us favourably on next generation
programmes, particularly in uncrewed and 6(th) generation fighters, and
especially in Europe where new developments are moving at pace.
WELL-POSITIONED IN STRUCTURAL GROWTH MARKETS
Melrose's revenue streams are broad-based, generating income from: Engines and
Structures; original equipment and aftermarket; and across both civil
aerospace and defence markets. Within civil, we have content on large,
regional and business jets and within defence, both fixed wing and rotorcraft.
In the first half, civil aerospace and defence represented 72% and 28% of
Group revenue respectively.
Across our end markets, the most notable development during the Period was the
outlook for defence, with global tensions and conflict driving a significant
increase in military spending commitments. In June, NATO members announced
their agreement to increase their defence spending target from 2% of gross
domestic product to 3.5%. In the US, the defence budget for 2026 was a
record-breaking proposal, requesting c.US$1 trillion with a number of
programme highlights including large weapons systems. In Europe, the ReArm
Europe Plan aims to mobilise €800 billion defence spending by 2029, and
Security Action for Europe is a new EU instrument offering €150 billion in
loans for joint procurement of military equipment. Through our existing
positions on major defence platforms (eg. F-35, Eurofighter, rotorcraft and
transport platforms) and our strong technology track record, we are well
placed to benefit from this increased spending and are already participating
on a number of new projects. Given these developments in the defence landscape
have only recently surfaced, the associated opportunities are not included in
our 2029 targets and so provide a potential source of upside.
In civil aerospace, we hold embedded positions on all leading commercial
narrowbody and widebody aircraft, with a stronger weighting towards Airbus. In
civil 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
namely: the CFM56 and IAE V2500, that power all mature single-aisle aircraft;
newer widebody engines namely the GE Aerospace GEnx and Rolls-Royce XWB; and
the Pratt & Whitney GTF PW1100G and PW1500G, which power the latest
narrowbody and regional aircraft. In all, our RRSPs cover around 70% of major
civil aircraft flight hours globally. In civil Structures, we have strong
embedded positions with over 70% of our content provided on a sole-sourced
basis. We have design-to-build expertise in metallic and composite components,
as well as wiring, transparencies and anti-ice systems for both civil and
defence platforms, including a strong presence in business jets.
During the first half, geopolitics continued to shape our end markets and the
increase in tariffs has added complexity and uncertainty. In the short-term,
the industry continues to navigate the impact of these new trade restrictions
which have put pressure on supply lines and customer deliveries. In response,
we took immediate action to assess their impact and as a result of working
closely with our partners and customers, have actioned a plan to successfully
mitigate our identified direct exposure. Here, our global footprint provides
us with excellent operational agility including the ability to rebalance
production quickly and efficiently.
Despite the challenges posed by tariffs, the combination of strong underlying
demand for new aircraft and a supply chain that continues to hold back OEM
build rates, means order backlogs remain at record levels, stretching well
into the 2030s. In June, Airbus reconfirmed its target to increase production
rates on the A320 to 75 per month by 2027 from 50 today. And on the 737MAX,
Boeing reached its target of 38 in May and is working with the FAA to increase
its monthly cap to 42 with a future goal of 47 plus. In the longer-term, the
substantial backlogs will support our expected future business growth.
While overall demand for air travel remains high with growth in engine flight
hours of 6% in the first half, driven by strong widebody and international
traffic, recent policy shifts in the US have slightly dampened growth
expectations. In their latest Global Outlook for Air Transport, IATA reduced
its forecast growth for air passenger traffic for 2025 from 8% to 5.8%, citing
a tapering of the recovery in the global economy and lower air traffic growth
in the US. Despite this, the dynamic of constrained build rates and record
order backlogs continues to force airlines to maximise load factors and fleet
utilisation which in turn is fuelling aftermarket and driving our Engines
division. Furthermore, as existing aircraft fly for longer, this will
require additional engine shop visits for mature engines.
During the Period, we have continued to work closely with Pratt & Whitney
and other partners to manage the previously announced powder metal issues on
the GTF, and significant progress has been made in line with Pratt &
Whitney's global fleet management plan. The ongoing block D upgrades together
with the entry into service of the GTF Advantage (which was certified by the
FAA in February) will further improve fuel consumption and durability. The GTF
is an excellent engine supporting the A320neo family, the A220 and the Embraer
E2 regional jet. The projected fleet size is expected to be three times that
of the V2500 (by the mid 2030's) and will therefore be a key driver of our
growth for many years to come, particularly given our relative shares on the
V2500 and GTF of 2% to 5% and 4 to 7% respectively.
DIFFERENTIATED TECHNOLOGY
During the Period, we continued our focus on advancement of next generation
technologies. Our role here is broad-based as we are shaping future propulsion
through Engines and making aircraft lighter and with less drag through
Structures. In both these areas we are also reducing the impact of today's
manufacturing on the environment.
Our additive fabrication technologies continue to progress, with the world's
first major structural component, the Fan Case Mount Ring component of the GTF
PW1500G engine for Pratt & Whitney, demonstrating around 40% material
waste reduction per part compared to traditional manufacturing methods. 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.
As part of the ASCEND consortium programme, we developed advanced
cost-effective composite materials and processes for lightweight structures.
We also launched a new R&D consortium (ASPIRE) on the next generation of
composite wings and flaps structures.
We delivered the first high voltage electrical wire harnesses for the
EU-supported SWITCH consortium project, dedicated to advancing hybrid-electric
aircraft. In our aftermarket services, the extension of our repairs contract
with Pratt & Whitney, demonstrates our continued commitment to improving
aircraft lifecycle and circularity.
Development of hydrogen capabilities underwent some important changes, as we
focussed our portfolio on the areas where we can add most value, recognising
also some important changes to the market's development timelines. UK and
Dutch governments signed a collaborative MoU, securing continued partnership
towards achieving hydrogen enabled aviation, which will continue through a
revised scope of our H2FLIGHT program in the UK and a new Airbus led ICEFLIGHT
initiative.
We remain well on track with our climate related sustainability targets,
including the launch of a business-wide supplier engagement programme,
encouraging suppliers to set science-based targets. Our commitment to meeting
our social targets continued, with continued investment in skills development,
with work ongoing to promote greater diversity and inclusion.
DISCIPLINED CAPITAL ALLOCATION AND ACCELERATING CASH GENERATION
We are entering a sustained period of significant cash generation. The
improvement in free cash flow in the first half versus the comparative period,
our leading positions and positive momentum provide confidence that we will
deliver a step change 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 and targeted expansion opportunities which should generate an IRR
>20%. In Structures, we are taking a capital-light approach which will be
primarily customer-funded with surplus cash generated reinvested into Engines.
In Engines, we are deploying capital in our unique additive fabrication
technology. Second, is our commitment to maintaining a sustained increase in
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 2x, with investment grade metrics
being targeted over time.
The Board has declared an interim dividend for 2025 of 2.4 pence per share, up
20%, which will be paid on 15 September 2025 to shareholders on the register
at the close of business on 15 August 2025.
At the end of the Period, we had completed £91 million of our £250 million
18-month share buyback and remain on track to complete this by March 2026.
BOARD CHANGES
The Melrose Board is continuing to evolve to align with our strategy as a
long-term aerospace and defence technology business and during the first half,
there were two 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 Non-executive
Chairman of the Board. Chris is a seasoned FTSE 100 executive and
non-executive, including in the aerospace and defence sector as former
Non-executive Director and Senior Independent Director of BAE Systems. Over
the past few months, in his role as Chairman, Chris has already engaged with a
number of our top shareholders.
On 19 May 2025, Alison Goligher was appointed to the Board as Non-executive
Director and Chair of the Remuneration Committee. Alison is currently
non-executive director of United Utilities Group PLC, where she has served on
the board since August 2016. Alison was previously non-executive director at
Meggitt PLC, the leading global aerospace and defence business, from 2014
until 2022 where she served as Chair of the remuneration committee and senior
independent director.
OUTLOOK
The Group is well placed to deliver further progress over the remainder of
2025. Since our full year results in March, sterling has strengthened against
the US dollar and so we have updated our Income Statement guidance to reflect
an average exchange rate across 2025 of $1.335 versus $1.25 in our original
guidance. Our free cash flow guidance is unchanged.
Guidance for 2025
Income Statement Updated (million)
Revenue:
Engines £1,525 - £1,575
Structures £1,900 - £2,000
Group £3,425 - £3,575
Adjusted operating profit
Engines £490 - £510
Structures £160 - £170
PLC costs (£30)
Group £620-£650
Free cash flow £100+ (maintained)
Five-year targets
In March, we set out medium-term targets to deliver significant growth in
revenue, profit and cash flow underpinned by our clear growth strategy which
are unchanged:
· Group revenue of £5.0 billion in 2029, reflecting high single
digit CAGR based on: current customer build rate assumptions being met by
2029; and industry flying hours forecasts; and FX at US $1.25
· Adjusted operating profit of £1.2 billion+ at Group level
(post-PLC costs) at a margin of 24%+, including c.£500 million of variable
consideration; adjusted diluted EPS CAGR of >20%
· Group free cash flow of £600 million (after interest and tax) to
be generated in 2029, driven by adjusted operating profit growth, maturing
portfolio of 19 RRSPs, the resolution of the GTF powder metal issue, the
completion of restructuring and ongoing business improvements
· Leverage to remain below 2x during the period, with increasing
headroom providing capital allocation optionality, including potential future
share buybacks.
DIVISIONAL REVIEWS
ENGINES
A strong first half performance
H1 2025 H1 2024 Growth
Engines adjusted results £m £m
Revenue 781 720 11%
Operating profit 261 212 26%
Operating profit margin 33.4% 29.4% +400bps
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. The business is well diversified, across
both civil and defence and original equipment and aftermarket. Its technology
leadership, particularly 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 a strong performance in the first half. Revenue
grew 11% to £781 million with growth in OE and the aftermarket of 7% and 15%
respectively. OE growth reflects good growth in widebody engines, a higher
spare engine ratio on the GTF and a better performance from our military ducts
business. This was partially offset by lower Swedish military government
partnership revenue against a tough comparator.
Aftermarket growth was powered by our RRSP portfolio where revenue grew by
25%. Within this, variable consideration at £182 million was up 17%,
demonstrating the strength of the non-variable consideration RRSP portfolio.
Aftermarket revenue from governmental was lower than the strong comparative
period. Repairs revenue was flat in the period due to initial tariff
uncertainty which reduced international repairs' imports into our US facility.
Having implemented a Temporary Importation under Bond process to restore
product flow, we remain positive about the outlook for our repairs business,
supported by the sustained activity of the legacy fleet and the ongoing
ramp-up in the GTF aftermarket. Adjusted operating profit increased 26% to
£261 million with adjusted operating profit margin of 33.4%, representing an
increase of 400bps on the prior period.
While we have seen some improvement in certain parts of the supply chain,
Engines continued to navigate a challenging operating environment in the first
half, including the constrained supply of forgings and castings. In common
with the wider aerospace and defence industry, the imposition of trade
restrictions in the form of US tariffs introduced additional operational
complexity in the Period. Against this backdrop, our focus has been to work
closely with all stakeholders to maintain production and the supply of our
components while using available mechanisms to mitigate the impact of tariffs.
Throughout the second half, we will continue to manage the supply environment
with ongoing focus on supplier development and performance while adapting to
potential changes in the operational environment.
In the first half, the division delivered continued commercial success. Demand
for our additive fabrication capabilities continued to grow, with new orders
signed and multiple new requests from OEM customers, building on our long-term
contracts with both Pratt & Whitney and GE Aerospace. In June, we
announced excellent progress on the Fan Case Mount Ring with the transition
from initial production phase to 100% serial production by end of 2025.
Shortly after the period-end, we announced an agreement with ArianeGroup to
supply several mission-critical components for the Ariane 6 launch vehicle.
The agreement builds on a decades-long partnership and includes the supply of
turbines and nozzle extensions on the Vulcain 2.1 engine, with the space
market acting as a vital technology driver for our commercial business. We
continue to invest in our global footprint including the installation of
further additive fabrication cells in the US and a new cell at our facility in
Kongsberg, Norway. This will increase capacity and accelerate full rate
production.
Our high-quality engine repair solutions business secured further contracts
from existing OEMs, including a five-year contract extension with Pratt &
Whitney to deliver high quality repairs for critical fan blades, and a
three-year defence contract for fan blade repairs for Boeing on the C-17
Globemaster. In terms of new capabilities, from a standing start in 2021, our
site in Malaysia has successfully industrialised 40 repairs processes for
eight key components of the PW1500/1900 engine. Our rapid repair turnaround
time and global footprint continue to drive customer demand for this exciting
growth area.
We continued to deepen our relationship with the Swedish Defence
Administration (FMV), broadening the scope of our relationship with investment
in engine assembly, test and MRO repair capabilities for the RM16 engine which
powers the Gripen E fighter. The move by certain countries to adopt mixed
fighter-jet fleets is also driving strong interest in the Gripen programme,
including the Philippines, India and Finland.
Operationally, the implementation of our 'Brilliant Basics' lean approach
continued to drive improvements across quality, delivery and safety. Employee
safety incidents were 7% lower than the same period in 2024, while quality
'escapes' were significantly down reducing by 75%. The digitalisation of
Engines sites also helped drive a significant increase in productivity across
the division. Our focus on creating a positive work environment meant that we
recorded increased employee engagement scores for the fifth successive
year.
Looking further ahead, on the technology side, Engines is the only strategic
partner on both future engine development programmes: the CFMI RISE and Pratt
& Whitney's next-generation GTF. Within RISE, our work is focused on
additive fabrication capability, while our core input in the future GTF is
around our leadership in complex load-bearing structures. During the Period we
continued to support work on these programmes including partner demand for
more components.
In the past twelve months, Engines has achieved several key additive
certification and technology milestones. These include FAA approval for its
first additively fabricated critical structural component and successful
delivery of its 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
Engines is a high-performing business, with exceptional potential. Our
proprietary technology, enviable customer partnerships, diverse RRSP
portfolio, and unique position within future engine programmes provides the
springboard for long-term structural growth.
For the full year, we expect the division to deliver revenue of £1,525 to
£1,575 million and adjusted operating profit of £490 million to £510
million (using a full year rate of $1.335). In line with seasonal trends,
Engines margins are expected to be lower in the second half with our guidance
for the full year of 32%+ remaining intact.
Over the medium-term the division is set to deliver significant growth, with
high single digit revenue CAGR between 2024 and 2029 and adjusted operating
margin in the mid to high 30s in 2029.
STRUCTURES
Growth in defence and strong margin progression
Structures adjusted results H1 2025 H1 2024 Growth(1)
£m £m
Revenue 939 1,022 3%
Operating profit 63 48 32%
Operating profit margin 6.7% 4.7% 200bps
(1) Revenue growth in H1 2025 on a like-for-like basis excluding exited
businesses
Our Structures division is a design-to-build partner on the world's most
successful and highest volume aircraft. It is also 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
ongoing production ramp-ups and actions to drive margin expansion, improving
quality of earnings and strong cash flow.
The outlook remains positive, underpinned by record level of backlogs for new
aircraft and the increase in global defence spending. In the short-term
however, the division has faced the dual challenges of OEM production rate
variability, plus increased supply chain complexity caused by the imposition
of US tariffs. Throughout the first half, the business has worked closely with
our customers and partners to mitigate the impact of these challenges while
ensuring the maintenance of planned production and installed capability
throughout the supply chain.
Structures revenue was 3% higher at £939 million on a like-for-like basis.
The division delivered good revenue growth in Defence, up 10%, driven by
programme ramps and improved commercial terms reflecting the work we have done
to enhance the portfolio. Revenue in Civil was in line year on year, with
growth in business jets and narrowbody offset by widebody and other platforms.
Adjusted operating profit was significantly higher, up 32% at £63 million.
Operating profit margin of 6.7% was 200bps above the comparative period,
reflecting the read through of the benefits associated with restructuring,
portfolio rationalisation and business improvement actions. The division
remains firmly on track to achieve its target of around 9% adjusted operating
margin in 2025.
During the Period, our Structures business made good commercial progress with
several new contract wins. In Civil, we signed an agreement with Archer to
further expand engagement in the 'Midnight' platform to cover both Electrical
systems and Wing Structure. The partnership supports Archer's production ramp
phase and reinforces both companies' commitment to advancing sustainable
aviation. In Defence, we signed a five-year follow-on contract with Lockheed
Martin for continued manufacture of C-130J nacelles through to the end of
2029. We also signed a six-year follow-on contract with BAE Systems for
continued manufacture of Typhoon canopies through to the end of 2030. Defence
continued to sustainably reprice its portfolio with a number of contracts
reset during the Period and we have already exceeded our end of year target to
have 85% of the portfolio sustainably priced.
We are now in the final stages of our restructuring programme which comprises
the payment of final closure costs. The multi-year programme, which will end
in 2025, has materially optimised and streamlined our global footprint through
the exit of non-core, and in some cases loss making business, and represents a
key driver of margin expansion for the division.
Operationally, steps were also taken to further enhance Structures'
manufacturing footprint. This included the establishment of EWIS capability at
our Mexico facility which successfully progressed through first article
approvals with Airbus. 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. Our
'Learning Centre' in Filton opened as a fully accessible centre to support
vocational and academic development for early careers to help secure the
necessary skills to deliver the expected ramp in OEM build rates. This
facility complements the training and technology development focus at the
Global Technology Centre, also located in the Filton, Bristol area.
The deployment of our 'Brilliant Basics' lean operating model continued to
drive operational improvements more broadly across the division. Quality
escapes reaching customers reduced by 13% compared to the first half of 2024,
with the cost of poor quality down by 9% (excluding exited sites). Employee
safety incidents were 50% lower than the same period in 2024. These metrics
reflect excellent progress in our top priority areas of safety and quality.
We made good progress enhancing our proprietary technology during the first
half. In Civil, we continued as a partner on Airbus' Sustainable Wings
(SusWings) project, the successor to the Wing of Tomorrow programme. In
parallel we launched the ASPIRE technology collaboration, to further explore
composite structures for the next generation of wings with complex
architecture. We also partnered with Airbus on the ICEFlight programme, partly
funded by Dutch Government, to develop the use of cryogenics for more
sustainable aircraft.
In Defence, we are working closely with our partners and defence agencies on a
number of new sovereign defence programmes in the UK, EU and US with a
particular focus on Europe given the step change in spending commitments and
our strong footprint in the region. These comprise work on next generation
transparencies and advanced airframes for future military platforms, including
uncrewed aircraft. These developments across our proprietary technology
portfolio are fully aligned with our strategy and will underpin our long-term
growth.
OUTLOOK
Structures is a design-led business with established technology positions on
all the world's leading aircraft. It has strong growth potential underpinned
by record order backlogs and production ramp-ups, albeit currently constrained
by supply chain issues and a challenging operating environment. We have the
momentum to deliver further progress in the second half as business
improvement actions and the impact of repricing in defence continues to read
through.
For the full year, we expect the division to deliver revenue of £1,900 to
£2,000 million and adjusted operating profit of £160 million to £170
million (using a full year rate of $1.335).
Over the medium-term the division is set to deliver significant growth with
high mid-single digit revenue CAGR between 2024 and 2029 and adjusted
operating margin in the low teens in 2029.
Peter Dilnot
Chief Executive Officer
1 August 2025
CHIEF FINANCIAL OFFICER'S REVIEW
MELROSE GROUP RESULTS
Statutory results:
The statutory IFRS results are shown on the face of the Income Statement and
show revenue of £1,720 million (2024: £1,742 million), an operating profit
of £441 million (2024: loss of £62 million) and a profit before tax of £379
million (2024: loss of £105 million). The diluted earnings per share ("EPS"),
calculated using the diluted weighted average number of shares during the
Period, were 22.2 pence (2024: loss of 6.1 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 changes
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 the Condensed Consolidated Interim Financial
Statements.
The Melrose Board considers the adjusted results to be an important measure
used to monitor how the business is performing as they achieve consistency and
comparability between reporting periods when all businesses are held for the
complete reporting period.
The adjusted results for the Period show revenue of £1,720 million (2024:
£1,742 million), an operating profit of £310 million (2024: £247 million)
and a profit before tax of £248 million (2024: £204 million). Adjusted
diluted EPS, calculated using the diluted weighted average number of shares in
the Period of 1,283 million (2024: 1,346 million), were 15.1 pence (2024: 11.9
pence).
The following tables shows the adjusted results for the Period split by
reporting segment:
Engines Structures Aerospace Corporate Total
£m £m £m £m £m
Revenue 781 939 1,720 - 1,720
Operating profit/(loss) 261 63 324 (14) 310
Operating margin 33.4% 6.7% 18.8% n/a 18.0%
Revenue for Engines of £781 million (2024: £720 million) shows constant
currency growth of 11% over 2024, with operating profit of £261 million
(2024: £212 million) giving an operating margin of 33.4% (2024: 29.4%), an
increase of 4.0 percentage points.
Revenue for Structures of £939 million (2024: £1,022 million) shows
like-for-like constant currency growth of 3% over 2024, (or a 7% reduction
including businesses exited during 2024), with operating profit of £63
million (2024: £48 million) giving an operating margin of 6.7% (2024: 4.7%),
an increase of 2.0 percentage points.
Corporate costs were £14 million (2024: £13 million) including costs of
long-term incentives of £1 million (2024: £nil).
Tables summarising the reconciliation of statutory results to adjusted results
by reportable segment are shown in note 3 of the Condensed Consolidated
Interim Financial Statements, with a Group table shown below.
RECONCILIATION OF STATUTORY RESULTS TO ADJUSTED RESULTS
The following table reconciles the Group statutory operating profit/(loss) to
adjusted operating profit:
Continuing operations: 2025 2024
£m £m
Statutory operating profit/(loss) 441 (62)
Adjusting items:
Amortisation of intangible assets acquired in business combinations 127 128
Restructuring costs 12 70
(Gains)/losses in derivatives and associated financial assets and liabilities (267) 51
Net changes in fair value items (3) 8
Acquisition and disposal related gains and losses - 38
Equity-settled compensation scheme charges - 14
Adjustments to statutory operating profit/(loss) (131) 309
Adjusted operating profit 310 247
Adjusting items to the statutory operating profit/(loss) are consistent with
prior periods and include:
· The amortisation charge on intangible assets acquired in business
combinations of £127 million (2024: £128 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
Period which totalled £12 million (2024: £70 million). These are shown as
adjusting items due to their size and non-trading nature and include a charge
of £10 million (2024: £48 million) relating to the finalisation of
significant restructuring projects across sites in the Engines and Structures
divisions in Europe and North America. These projects are substantially
complete after a cumulative charge since commencement of £291 million (31
December 2024: £281 million).
As at 30 June 2025, £6 million is included in restructuring provisions in
relation to the multi-year programmes to be settled in cash over the next six
months.
· 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 £267 million (2024: charge of £51 million) in the Period and is
shown as an adjusting item because of its volatility and size.
· The net changes in fair value items which totalled a credit of £3
million (2024: charge of £8 million) and are shown as an adjusting item due
their size and volatility.
· Acquisition and disposal related gains and losses of £nil (2024:
loss of £38 million).
· Charges for the Melrose equity-settled Employee Share Plan which
matured in 2024 of £nil (2024: £14 million). This was excluded from adjusted
results due to its size and volatility.
TAX
The statutory results for the Period show a tax charge of £94 million (2024:
credit of £25 million), arising on a statutory profit before tax of £379
million (2024: loss before tax of £105 million). The effective tax rate on
adjusted profit before tax is 21.8% (2024: 21.6%). During the Period, the
Group paid tax of £11 million (2024: £10 million).
CASH GENERATION AND MANAGEMENT
Adjusted free cash flow for the Period was an outflow of £37 million (2024:
£60 million), after net interest and tax spend of £64 million (2024: £46
million), but before restructuring spend of £17 million (2024: £85
million).
An analysis of free cash flow is shown in the table below:
2025 2024
£m £m
Continuing operations:
Adjusted operating profit 310 247
Depreciation and amortisation 67 72
Lease obligation payments (17) (19)
Positive non-cash impact from loss-making contracts (5) (16)
Working capital movements:
Inventory (85) (98)
Receivables and payables 30 34
Unbilled work done (219) (166)
Adjusted operating cash flow 81 54
Net capital expenditure (50) (57)
Defined benefit pension contributions (2) (2)
Restructuring (17) (85)
Net other (2) (9)
Free cash flow pre-interest and tax 10 (99)
Net interest and net tax paid (64) (46)
Free cash flow (54) (145)
Adjusted free cash flow (37) (60)
During the Period working capital, excluding unbilled worked done, increased
due to the normal seasonal pattern and supply chain challenges. Non-recourse
factoring utilisation was £340 million (31 December 2024: £338 million).
Unbilled work done, excluding exchange adjustments, has increased by £219
million. This includes net changes in variable consideration of £182
million and £37 million of obligations settled in connection with powder
metal issues on certain Pratt & Whitney engines.
Net capital expenditure in the Period was £50 million (2024: £57 million)
and represented 1.0x (2024: 1.0x) depreciation of owned assets.
Restructuring spend in the Period reduced as planned to £17 million (2024:
£85 million).
The net interest paid in the Period was £53 million (2024: £36 million), net
tax payments were £11 million (2024: £10 million) and contributions to
defined benefit pension schemes were £2 million (2024: £2 million).
The movement in net debt is summarised as follows:
£m
Opening net debt (1,321)
Free cash flow (54)
Net cash flow from acquisitions and disposals 4
Amounts paid to shareholders (122)
Other (5)
FX and other non-cash movements 94
Net debt at 30 June 2025 at closing exchange rates (1,404)
Group net debt at 30 June 2025, translated at closing exchange rates (being US
$1.37 and €1.17), was £1,404 million (31 December 2024: £1,321 million),
after a free cash outflow of £54 million, described above. Movement in
Group net debt also included the payment of the 2024 final dividend of £51
million, £71 million spent buying back 14,180,323 shares in the market and a
net £4 million cash inflow from acquisitions and disposals. There were also
net favourable foreign exchange movements of £97 million offset by other
non-cash movements of £3 million.
Group leverage at 30 June 2025 was 2.0x EBITDA (31 December 2024: 1.9x
EBITDA). Interest cover at 30 June 2025 was 6.8x (31 December 2024: 7.4x).
PROVISIONS
Total provisions at 30 June 2025 were £165 million (31 December 2024: £184
million).
The following table details the movement in provisions in the Period:
Total
£m
Provisions at 1 January 2025 184
Net charge in the Period 21
Spend against provisions (26)
Utilisation of loss-making contract provision (5)
Foreign exchange (9)
Provisions at 30 June 2025 165
The net charge to the Income Statement in the Period was £21 million (2024:
£84 million), including £11 million (2024: £55 million) relating to
restructuring activities. This is shown as an adjusting item and is included
in the adjusting items section discussed earlier in this review.
During the Period, £5 million (2024: £16 million) was utilised against
loss-making contract provisions and £26 million (2024: £101 million) of cash
was spent against other provisions including £17 million (2024: £85 million)
relating to restructuring activities.
PENSIONS AND POST-EMPLOYMENT OBLIGATIONS
Melrose operates a number of defined benefit pension schemes and retiree
medical plans across the Group. The values of the Group plans were updated
at 30 June 2025 by independent actuaries to reflect the latest key assumptions
and are summarised as follows:
Liabilities Accounting deficit
Assets £m £m
£m
UK Plans 936 (959) (23)
US Plans 28 (49) (21)
Other Plans - (8) (8)
Total Group pension schemes 964 (1,016) (52)
At 30 June 2025, the total plan assets of defined benefit pension plans have
reduced to £964 million (31 December 2024: £986 million) and total plan
liabilities to £1,016 million (31 December 2024: £1,045 million), a net
deficit of £52 million (31 December 2024: £59 million).
The GKN UK Group Pension Schemes (Numbers 1 and 4), included above within UK
plans, are the most significant pension plans remaining in the Group and are
closed to new members and to the accrual of future benefits for current
members.
During the year ended 31 December 2023, the Group commenced a process to
buy-out the GKN UK Group Pension Scheme Number 4, which is expected to
complete in 2025, when the scheme assets and liabilities will leave the Group
and cease being shown on the Group's Balance Sheet.
At 30 June 2025, the GKN UK Group Pension Scheme Number 1 had gross assets of
£567 million (31 December 2024: £577 million), gross liabilities of £584
million (31 December 2024: £599 million) and a net deficit of £17 million
(31 December 2024: £22 million).
Other pension schemes in the Group include US pension plans which are
generally funded schemes and closed to new members. At 30 June 2025, these
US pension plans had a net deficit of £21 million (31 December 2024: £23
million).
A summary of the assumptions used are shown in note 11 to the Condensed
Consolidated Interim Financial Statements.
FINANCIAL RISKS AND UNCERTAINTIES
The principal financial risks and uncertainties faced by the Group include
liquidity risk, finance cost risk, exchange rate risk, contract and warranty
risk and commodity cost risk. The nature of these risks in relation to the
Group are explained in detail on pages 30 to 32 of the 2024 Annual Report, a
copy of which is available on the Company's website, www.melroseplc.net
(http://www.melroseplc.net) .
Further explanations and details of the strategic risk profile of the Group,
which includes non-financial risk, are set out on pages 34 to 44 of the 2024
Annual Report.
EXCHANGE RATES USED IN THE PERIOD
Exchange rates used for currencies most relevant to the Group in the Period
were:
US Dollar Closing
Average rate Rate
Six months to 30 June 2025 1.30 1.37
Twelve months to 31 December 2024 1.28 1.25
Six months to 30 June 2024 1.26 1.26
Euro
Six months to 30 June 2025 1.19 1.17
Twelve months to 31 December 2024 1.18 1.21
Six months to 30 June 2024 1.17 1.18
The Group policy on exchange rate risk is explained on page 31 of the 2024
Annual Report.
The following table shows an indication of a full year impact of a 10 percent
strengthening of the US Dollar and the Euro, if they were to strengthen in
isolation against all other currencies, on the re-translation of adjusted
operating profit into Sterling:
USD EUR
Increase in adjusted operating profit - £ million 59 5
% impact on adjusted operating profit 9% 1%
In the first half of the year, the Group incurred a 3% translational foreign
exchange loss on adjusted operating profit compared to the same period last
year.
The impact from transactional foreign exchange exposures is not material in
the short-term due to hedge coverage being approximately 90%.
The Group utilises its multi-currency banking facility to maintain an
appropriate mix of debt in US Dollars, Euros and Sterling. The hedge of
having debt drawn in US Dollars and Euros protects against some of the Balance
Sheet and banking covenant foreign exchange translation risk. A 10 percent
strengthening in either the US Dollar or Euro would have had the following
impact on gross debt as at 30 June 2025:
USD EUR
Increase in gross debt - £ million 115 31
% impact on gross debt 8% 2%
LIQUIDITY RISK MANAGEMENT
The Group's net debt position at 30 June 2025 was £1,404 million (31 December
2024: £1,321 million). At December 2024, the Group had committed
multi-currency term loans and revolving credit facilities of US$1,639 million,
€400 million and £300 million. During the Period, the Group arranged
additional committed facilities of €355 million maturing in January 2027,
and facilities of US$70 million and £50 million maturing in January 2026.
Additionally US$29 million of revolving credit facilities were not replaced.
A summary of the Group's committed bank facilities, drawings and headroom are
shown in the table below.
Local currency £m
Size Drawn Headroom Headroom
Term loans:
USD 549 549 - -
EUR 280 280 - -
Revolving credit facilities:
USD 1,131 1,042 89 65
GBP 350 54 296 296
EUR 475 88 387 332
Total (GBP) 2,223 1,530 693
As at 30 June 2025, the term loans were fully drawn and there was £889
million of drawings across the revolving credit facilities. Applying the
exchange rates at 30 June 2025 headroom was £693 million.
In addition to the headroom across the revolving credit facilities, at 30 June
2025 cash, deposits and marketable securities, net of overdrafts, in the Group
amounted to £121 million (31 December 2024: £80 million), whilst there were
no drawings on uncommitted borrowing facilities (31 December 2024: £nil).
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 in June and December.
The banking covenant leverage test level is set at 3.5x. At 30 June 2025, the
Group banking covenant leverage was 2.1x, affording comfortable headroom.
The interest cover test is set at 4.0x. At 30 June 2025 the Group interest
cover was 6.8x, again showing comfortable headroom compared to the covenant
test.
FINANCE COST RISK MANAGEMENT
The Group uses financial derivatives to fix a portion of the cost of its
floating rate borrowings. The combination of these items as well as borrowings
on the Group's bank facilities is expected to result in the cost of drawn debt
for the year to be approximately 5.4%.
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 market
and internal data and recent past experience.
The Group has modelled a severe but plausible downside case against these
future cash forecasts and throughout this scenario, the Group has sufficient
headroom to avoid breaching any of its financial covenants and would not
require any additional sources of financing.
The Directors recognise the challenges in the current economic environment,
including challenges in supply chains and the Group is actively managing the
associated impacts on trading through a sharp focus on pricing, productivity
and costs.
The macroeconomic environment remains uncertain and volatile and the impacts
of the economic factors discussed above could be more prolonged or severe than
that which the Directors have considered in the Group's severe but plausible
downside case.
However, the Group's current committed bank facility headroom, its access to
liquidity, and the level of bank covenants in place with lending banks, allow
the Directors to consider it appropriate that the Group can manage its
business risks successfully and adopt a going concern basis in preparing these
Condensed Consolidated Interim Financial Statements.
Matthew Gregory
Chief Financial Officer
1 August 2025
CAUTIONARY STATEMENT
This announcement contains forward-looking statements. These statements are
made in good faith based on the information available up to the time of the
approval of this announcement, and should be treated with caution due to the
inherent uncertainties, including both economic and business risk factors,
underlying any such forward-looking information. Accordingly, readers are
cautioned not to place undue reliance on any such forward-looking statements.
Subject to compliance with applicable laws and regulations, the Company does
not undertake any obligation to update any forward-looking statement to
reflect events or circumstances after the date of this announcement. This
announcement has been prepared solely to provide information to shareholders
to assess the Company's strategies and the potential for those strategies to
succeed, and neither the Company nor its directors accept any liability to any
other person save as would arise under English law.
NO OFFER OF SECURITIES
Nothing in this announcement constitutes an offer of securities for sale in
the U.S. Securities may not be sold in the U.S. absent registration or an
exemption from registration.
DIRECTORS' RESPONSIBILITY STATEMENT
We, the directors of the Company, confirm to the best of our knowledge:
1. the condensed financial statements have been prepared in accordance
with IAS 34 "Interim Financial Reporting" as adopted by the UK;
2. the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events and their impact during
the first six months, and description of principal risks and uncertainties for
the remaining six months of the financial year); and
3. the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and
changes therein).
Details of the directors of the Company are available on our website
at https://www.melroseplc.net/governance/board-leadership/
(https://www.melroseplc.net/governance/board-leadership/) .
By order of the Board
Peter
Dilnot
Matthew Gregory
Chief Executive
Officer
Chief Financial Officer
1 August
2025
1 August 2025
Independent review report to Melrose Industries PLC
Report on the condensed consolidated interim financial statements
Our conclusion
We have reviewed Melrose Industries PLC's condensed consolidated interim
financial statements (the "interim financial statements") in the Unaudited
Results of Melrose Industries PLC for the 6 month period ended 30 June 2025
(the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
The interim financial statements comprise:
· the condensed consolidated balance sheet as at 30 June 2025;
· the condensed consolidated income statement and the condensed
consolidated statement of comprehensive income for the period then ended;
· the condensed consolidated statement of cash flows for the period then
ended;
· the condensed consolidated statement of changes in equity for the
period then ended; and
· the explanatory notes to the interim financial statements.
The interim financial statements included in the Unaudited Results of Melrose
Industries PLC have been prepared in accordance with UK adopted International
Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, 'Review of Interim Financial Information Performed by
the Independent Auditor of the Entity' issued by the Financial Reporting
Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and, consequently, does not
enable us to obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do not express
an audit opinion.
We have read the other information contained in the Unaudited Results and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However, future events
or conditions may cause the group to cease to continue as a going concern.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The Unaudited Results, including the interim financial statements, is the
responsibility of, and has been approved by the directors. The directors are
responsible for preparing the Unaudited Results in accordance with the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority. In preparing the Unaudited Results, including the
interim financial statements, the directors are responsible for assessing the
group's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to
cease operations, or have no realistic alternative but to do so.
Our responsibility is to express a conclusion on the interim financial
statements in the Unaudited Results based on our review. Our conclusion,
including our Conclusions relating to going concern, is based on procedures
that are less extensive than audit procedures, as described in the Basis for
conclusion paragraph of this report. This report, including the conclusion,
has been prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We do not, in
giving this conclusion, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
1 August 2025
Melrose Industries
PLC
Condensed Consolidated Income Statement
Continuing operations 6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2024
2025 2024 Audited
Unaudited Unaudited £m
£m £m
Notes
Revenue 3 1,720 1,742 3,468
Cost of sales (1,266) (1,338) (2,646)
Gross profit 454 404 822
Operating expenses (13) (466) (826)
Operating profit/(loss) 3,4 441 (62) (4)
Finance costs (62) (45) (105)
Finance income - 2 3
Profit/(loss) before tax 379 (105) (106)
Tax 5 (94) 25 57
Profit/(loss) after tax for the period attributable to owners of the parent
285 (80) (49)
Earnings per share
- Basic 6 22.3p (6.1)p (3.7)p
- Diluted 6 22.2p (6.1)p (3.7)p
Adjusted((1)) results
Adjusted operating profit 3,4 310 247 540
Adjusted profit before tax 4 248 204 438
Adjusted profit after tax 4 194 160 350
Adjusted basic earnings per share 6 15.2p 12.1p 26.8p
Adjusted diluted earnings per share 6 15.1p 11.9p 26.4p
( )
((1)) Defined in the summary of material accounting policies (see note 2).
Melrose Industries PLC
Condensed Consolidated Statement of Comprehensive Income
6 months 6 months Year ended
ended ended 31 December
30 June
30 June
2025
2024 2024
Unaudited Unaudited Audited
£m £m £m
Notes
Profit/(loss) after tax for the period 285 (80) (49)
Items that will not be reclassified subsequently to the
Income Statement:
Net remeasurement gain on retirement benefit obligations 6 12 27
Fair value gain/(loss) on investments in equity instruments 4 3 (47)
Income tax charge relating to items that will not be reclassified 5 (1) (3) (4)
9 12 (24)
Items that may be reclassified subsequently to the
Income Statement:
Currency translation (loss)/gain on net investments (164) 16 17
Transfer to Income Statement from equity of cumulative translation differences
on disposal of foreign operations
- (6) (6)
Derivative (losses)/gains on hedge relationships (14) 4 3
Income tax credit/(charge) relating to items that may be reclassified 5 6 - (1)
(172) 14 13
Other comprehensive (expense)/income for the period (163) 26 (11)
Total comprehensive income/(expense) for the period attributable to owners of
the parent
122 (54) (60)
Melrose Industries PLC
Condensed Consolidated Statement of Cash Flows
6 months 6 months Year ended
ended ended 31 December 2024
30 June 30 June Audited
2025
2024
£m
Unaudited Unaudited
£m £m
Notes
Net cash from/(used in) operating activities 12 8 (90) (121)
Investing activities
Disposal of businesses, net of cash disposed - 56 55
Acquisition of subsidiaries 2 (5) - -
Purchase of property, plant and equipment (46) (50) (108)
Purchase of computer software and capitalised development costs (4) (7) (15)
Disposal of investments 8 9 - -
Equity accounted investment additions - - (3)
Interest received - 2 3
Net cash (used in)/from investing activities (46) 1 (68)
Financing activities
Repayment of borrowings - - (10)
Drawings on borrowing facilities 220 512 767
Costs of raising debt finance (1) (3) (3)
Repayment of principal under lease obligations (17) (19) (32)
Purchase of own shares, including associated costs 7 (71) (246) (431)
Dividends paid to owners of the parent 7 (51) (46) (72)
Net cash from financing activities 80 198 219
Net increase in cash and cash equivalents, net of bank overdrafts 42 109 30
Cash and cash equivalents, net of bank overdrafts at the beginning of the
period
80 57 57
Effect of foreign exchange rate changes (1) - (7)
Cash and cash equivalents, net of bank overdrafts at the end of the
period
12 121 166 80
As at 30 June 2025, the Group had net debt of £1,404 million (31 December
2024: £1,321 million). A definition and reconciliation of the movement in net
debt is shown in note 12.
Melrose Industries PLC
Condensed Consolidated Balance Sheet
30 June Restated((1)) 31 December
2025
30 June 2024
Unaudited
2024
Audited
£m Unaudited
£m
£m
Notes
Non-current assets
Goodwill and other intangible assets 2,782 3,225 3,094
Property, plant and equipment 825 749 821
Investments 59 118 69
Interests in equity accounted investments 7 6 8
Deferred tax assets 612 569 651
Derivative financial assets 105 23 12
Other receivables 1,141 1,061 1,201
5,531 5,751 5,856
Current assets
Inventories 585 554 528
Trade and other receivables 1,047 839 949
Derivative financial assets 42 10 10
Current tax assets 1 2 5
Cash and cash equivalents 124 189 88
1,799 1,594 1,580
Total assets 3 7,330 7,345 7,436
Current liabilities
Trade and other payables 1,505 1,530 1,510
Interest-bearing loans and borrowings 53 84 8
Lease obligations 13 33 31 33
Derivative financial liabilities 19 54 72
Current tax liabilities 11 11 20
Provisions 9 90 123 108
1,711 1,833 1,751
Net current assets/(liabilities) 88 (239) (171)
Non-current liabilities
Other payables 381 501 469
Interest-bearing loans and borrowings 1,475 1,081 1,401
Lease obligations 13 236 151 204
Derivative financial liabilities 20 77 115
Deferred tax liabilities 528 475 517
Retirement benefit obligations 11 52 90 59
Provisions 9 75 78 76
2,767 2,453 2,841
Total liabilities 3 4,478 4,286 4,592
Net assets 2,852 3,059 2,844
Equity
Issued share capital 1 309 1
Share premium account 1,000 3,271 1,000
Merger reserve 109 109 109
Capital redemption reserve - 753 -
Other reserves (2,330) (2,330) (2,330)
Translation and hedging reserve 114 287 286
Retained earnings 3,958 660 3,778
Total equity attributable to owners of the parent 2,852 3,059 2,844
((1)) Inventories, trade and other receivables and trade and other payables
have been restated (see note 2).
Melrose Industries PLC
Condensed Consolidated Statement of Changes in Equity
Issued share capital Share premium account Other reserves Translation Retained earnings Total equity attributable to owners of the parent
£m £m £m and hedging reserve £m £m
Capital £m
Merger reserve redemption
£m reserve
£m
At 1 January 2024 309 3,271 109 753 (2,330) 273 1,182 3,567
Loss for the period - - - - - - (80) (80)
Other comprehensive income - - - - - 14 12 26
Total comprehensive income/(expense) - - - - - 14 (68) (54)
Dividends paid (note 7) - - - - - - (46) (46)
Purchase of own shares - - - - - - (257) (257)
Equity-settled incentive scheme related (note 2) - - - - - - (157) (157)
Deferred tax on equity-settled share-based payments (note 5) - - - - - - 6 6
At 30 June 2024 (unaudited) 309 3,271 109 753 (2,330) 287 660 3,059
Profit for the period - - - - - - 31 31
Other comprehensive expense - - - - - (1) (36) (37)
Total comprehensive expense - - - - - (1) (5) (6)
Dividends paid (note 7) - - - - - - (26) (26)
Capital reduction (note 2) (308) (2,271) - (753) - - 3,332 -
Purchase of own shares - - - - - - (192) (192)
Equity-settled share-based payments - - - - - - 1 1
Deferred tax on equity-settled share-based payments - - - - - - 8 8
At 31 December 2024 (audited) 1 1,000 109 - (2,330) 286 3,778 2,844
Profit for the - - - - - - 285 285
period
Other comprehensive (expense)/income - - - - - (172) 9 (163)
Total comprehensive (expense)/income - - - - - (172) 294 122
Dividends paid (note 7) - - - - - - (51) (51)
Purchase of own shares (note 2) - - - - - - (61) (61)
Equity-settled share-based payments - - - - - - 1 1
Deferred tax on equity-settled share-based payments (note 5) - - - - - - (3) (3)
At 30 June 2025 (unaudited) 1 1,000 109 - (2,330) 114 3,958 2,852
Notes to the Condensed Consolidated Interim Financial Statements
1. Corporate information
The interim financial information for the six months ended 30 June 2025 has
been reviewed by the auditor, but not audited. The information for the year
ended 31 December 2024 shown in this report does not constitute statutory
accounts for that year as defined in section 434 of the Companies Act 2006. A
copy of the statutory accounts for that year has been delivered to the
Registrar of Companies. The auditor has reported on those accounts. Their
report was unqualified, did not draw attention to any matters by way of
emphasis and did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
2. Summary of material accounting policies
The interim financial information for the six months ended 30 June 2025, which
has been approved by the Board of Directors, has been prepared on the basis of
the accounting policies set out in the Group's 2024 Annual Report on pages 174
to 184.
The Group's 2024 Annual Report can be found on the Group's website
www.melroseplc.net. These Condensed Consolidated Interim Financial Statements
should be read in conjunction with the 2024 information and have been prepared
in accordance with UK adopted International Accounting Standards ("IAS") and
International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board. These Condensed Consolidated Interim
Financial Statements do not comprise statutory accounts within the meaning of
section 435 of the Companies Act 2006 and have been prepared in accordance
with IAS 34: Interim Financial Reporting.
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 six month
period ended 30 June 2025, 14,180,323 shares were purchased at an average
price of 504 pence per share for a total cash consideration of £71 million,
inclusive of costs of £nil. These are held as treasury shares and the total
costs of the purchase have been recognised in retained earnings. A liability
of £8 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 30 June 2025.
On 3 June 2024, 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.
Following approval from shareholders on 2 May 2024, the Group undertook a
capital reduction which completed on 11 July 2024. 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.
Prior period restatement of inventories, trade and other receivables and trade
and other payables
At the end of 2024, the Group changed its presentation of inventories, trade
and other receivables and trade and other payables within the Balance Sheet.
The change related to contract balances for certain programmes. The Group was
previously netting certain amounts under these arrangements, however, it was
determined that the appropriate current and prior year presentation should be
on a gross basis in line with the requirements of IFRS 15: Revenue from
Contracts with Customers. Prior period comparatives at 30 June 2024 have been
restated accordingly. The impact of this change on the Balance Sheet at 30
June 2024 was to increase inventories by £10 million, non-current other
receivables by £91 million, current trade and other receivables by £120
million, current trade and other payables by £130 million and non-current
other payables by £91 million.
Alternative performance measures
The Group presents Alternative Performance Measures ("APMs") in addition to
the statutory results. 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 Condensed Consolidated
Interim Financial Statements and the reconciling items between statutory and
adjusted results are listed below and described in more detail in note 4.
2. Summary of material accounting policies (continued)
Adjusted profit measures exclude items which are significant in size or
volatility or by nature are non-trading or non-recurring or are the net
changes 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 in
nature and/or value 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 businesses are performing as this provides a meaningful
reflection of how the businesses are managed and measured on a day-to-day
basis and achieves consistency and comparability between reporting periods,
when all businesses 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 period results and comparative periods where provided.
Going concern
The Condensed Consolidated Interim 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 at 30 June
2025 (£0.7 billion) and 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 in June and December. Covenant calculations are detailed in
the glossary to these Condensed Consolidated Interim Financial Statements.
The financial covenants for the going concern period are as follows:
30 June 31 December 30 June
2025 2025 2026
Net debt to adjusted EBITDA (banking covenant leverage) 3.5x 3.5x 3.5x
Interest 4.0x 4.0x 4.0x
cover
Testing
The Group 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 July 2025.
The severe but plausible downside case models more conservative revenue and
working capital assumptions in the remaining period of 2025 and the relevant
period in 2026. However, given there is liquidity headroom of £0.7 billion
and the Group's banking covenant leverage is 2.1x at 30 June 2025, comfortably
below future testing levels, no further sensitivity detail is provided.
2. Summary of material accounting policies (continued)
Under the severe but plausible downside case no covenant is breached at 31
December 2025 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 30 June 2026 or 31 December 2026.
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. 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.
Structures - A multi-technology global tier one supplier of both civil and
defence air frames, 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. The corporate cost centre contains the Melrose Group head office costs
and charges related to certain of the Group's senior management long-term
incentive plans.
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 six month period ended 30 June 2025 and comparative periods.
a) Segment revenues
6 months Year ended
Continuing operations 6 months ended 31 December
ended 30 June 2024
2024
30 June
£m
2025 £m
£m
Engines 781 720 1,459
Structures 939 1,022 2,009
Revenue 1,720 1,742 3,468
b) Segment operating profit
6 months ended 30 June 2025 Engines Structures Corporate((1))
£m £m £m Total
Continuing operations £m
Adjusted operating profit/(loss) 261 63 (14) 310
Items not included in adjusted operating profit((2)):
Amortisation of intangible assets acquired in business combinations (66) (61) - (127)
Restructuring costs (2) (10) - (12)
(Losses)/gains in derivatives and associated financial assets and liabilities (16) (4) 287 267
Net changes in fair value items (1) 4 - 3
Operating profit/(loss) 176 (8) 273 441
Finance costs (62)
Finance income -
Profit before tax 379
Tax (94)
Profit after tax for the period attributable to owners of the parent 285
((1)) Corporate adjusted operating loss of £14 million includes a charge of
£1 million in respect of the Performance Share Plan for certain senior
managers in the Group.
((2)) For further details on adjusting items, refer to note 4.
3. Segment information (continued)
b) Segment operating profit (continued)
6 months ended 30 June 2024 Engines Structures Corporate((1)) Total
£m £m £m £m
Continuing operations
Adjusted operating profit/(loss) 212 48 (13) 247
Items not included in adjusted operating profit((2)):
Amortisation of intangible assets acquired in business combinations (66) (62) - (128)
Restructuring costs (11) (38) (21) (70)
Gains/(losses) in derivatives and associated financial assets and liabilities 4 - (55) (51)
Acquisition and disposal related gains and losses - (37) (1) (38)
Melrose equity-settled compensation scheme charges - - (14) (14)
Net changes in fair value items - (8) - (8)
Operating profit/(loss) 139 (97) (104) (62)
Finance costs (45)
Finance income 2
Loss before tax (105)
Tax 25
Loss after tax for the period attributable to owners of the parent (80)
((1)) Corporate adjusted operating loss of £13 million includes a charge of
£nil in respect of the Performance Share Plan for certain senior managers in
the Group.
((2)) For further details on adjusting items, refer to note 4.
Year ended 31 December 2024 Engines Structures Corporate((1)) Total
£m £m £m £m
Continuing operations
Adjusted operating profit/(loss) 422 144 (26) 540
Items not included in adjusted operating profit((2)):
Amortisation of intangible assets acquired in business combinations (131) (124) - (255)
Gains/(losses) in derivatives and associated financial assets and liabilities 7 - (119) (112)
Restructuring costs (15) (75) (21) (111)
Acquisition and disposal related gains and losses - (43) (1) (44)
Melrose equity-settled compensation scheme charges - - (14) (14)
Net changes in fair value items - (8) - (8)
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 attributable to owners of the parent (49)
((1)) Corporate adjusted operating loss of £26 million includes a charge of
£1 million in respect of the Performance Share Plan for certain senior
managers in the Group.
((2)) For further details on adjusting items, refer to note 4.
c) Segment total assets and liabilities
Total assets Total liabilities
Restated((1)) Restated((1))
30 June 30 June 31 December 30 June 30 June 31 December
2025 2024 2024 2025 2024 2024
£m £m £m £m £m £m
Engines 4,357 4,326 4,595 1,645 1,570 1,757
Structures 2,277 2,321 2,284 1,197 1,144 1,134
Corporate 696 698 557 1,636 1,572 1,701
Total 7,330 7,345 7,436 4,478 4,286 4,592
( )
((1)) Inventories, trade and other receivables and trade and other payables
have been restated (see note 2).
(
)
( )
3. Segment information (continued)
d) Segment capital expenditure and depreciation
Capital expenditure((1)) Depreciation of owned assets((1)) Depreciation of leased assets
6 months ended Year ended 6 months ended Year ended 6 months ended Year ended
6 months ended 30 June 31 December 6 months ended 30 June 31 December 6 months ended 30 June 31 December
30 June 2024 2024 30 June 2024 2024 30 June 2024 2024
2025 £m £m 2025 £m £m 2025 £m £m
£m £m £m
Engines 28 27 63 21 22 43 5 3 7
Structures 17 25 54 31 38 74 9 8 17
Corporate - - 1 - - - 1 1 1
Total 45 52 118 52 60 117 15 12 25
( )
((1)) Includes 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 specific
segment assets (non-current assets excluding deferred tax assets, non-current
derivative financial assets and non-current other receivables), by
geographical location are detailed below:
Revenue((1)) from external customers Segment assets
6 months ended Year ended 30 June 30 June ( )
30 June
2025
2024
6 months ended
2024 31 December
31 December 2024
30 June
£m £m
2025 £m 2024 £m
£m £m
UK 275 282 569 724 828 739
Rest of Europe 249 282 567 1,884 2,114 2,061
North America 1,144 1,126 2,232 1,023 1,136 1,145
Other 52 52 100 42 20 47
Total 1,720 1,742 3,468 3,673 4,098 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 performance of the Group.
a) Operating profit
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2025 2024 2024
Continuing operations Notes £m £m £m
Operating profit/(loss) 441 (62) (4)
Amortisation of intangible assets acquired in business combinations
a 127 128 255
Restructuring costs b 12 70 111
(Gains)/losses in derivatives and associated financial assets and liabilities (267)
c 51 112
Net changes in fair value items d (3) 8 8
Acquisition and disposal related gains and losses e - 38 44
Melrose equity-settled compensation scheme charges f - 14 14
Total adjustments to operating profit/(loss) (131) 309 544
Adjusted operating profit 310 247 540
a. The amortisation charge on intangible assets acquired in business
combinations totalled £127 million (2024: £128 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.
4. Reconciliation of adjusted profit measures (continued)
b. Costs associated with significant restructuring projects in the period
totalled £12 million (2024: £70 million). These are shown as adjusting items
due to their size and non-trading nature and include a charge of £10 million
(2024: £48 million) relating to the finalisation of significant restructuring
projects across sites in the Engines and Structures divisions in Europe and
North America. These projects are substantially complete after a cumulative
charge since commencement of £291 million (31 December 2024: £281 million).
As at 30 June 2025, £6 million is included in restructuring provisions in
relation to the multi-year programmes described above to be settled in cash
over the next six months.
c. 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 totalled a credit
of £267 million (2024: charge of £51 million) in the period and are shown as
an adjusting item because of volatility and size.
d. Net changes in fair value items totalled a credit of £3 million (2024:
charge of £8 million) and are shown as an adjusting item due to their size
and volatility.
e. There were no acquisition or disposal related gains or losses in the
period (2024: loss of £38 million).
f. The Melrose equity-settled Employee Share Plan matured during 2024.
The charge of £14 million in the prior period was excluded from adjusted
results due to its size and volatility.
Adjustments to operating profit/(loss) identified above resulted in a net cash
spend of £22 million (2024: £48 million) in the period, being cash costs
associated with restructuring programmes of £17 million (2024: £85 million),
£5 million of cash costs associated with legacy Melrose operations, a net
cash inflow on acquisition and disposal related gains and losses of £nil
(2024: £55 million), and cash costs of the Melrose equity-settled
compensation scheme of £nil (2024: £18 million).
b) Profit before tax
( ) ( )
6 months 6 months Year ended
31 December
ended ended
2024
£m
30 June 30 June
2025 2024
Continuing operations £m £m
Profit/(loss) before tax 379 (105) (106)
Adjustments to operating profit/(loss) as above (131) 309 544
Adjusted profit before tax 248 204 438
c) Profit after tax
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2025 2024 2024
£m £m £m
Continuing operations
Profit/(loss) after tax 285 (80) (49)
Adjustments to profit/(loss) before tax as above (131) 309 544
Tax effect of adjustments to profit/(loss) before tax:
Amortisation of intangible assets acquired in business combinations
(29) (30) (59)
Restructuring costs (3) (17) (28)
Gains/losses in derivatives and associated financial assets and liabilities
71 (14) (30)
Net changes in fair value items 1 (2) (2)
Acquisition and disposal related gains and losses - (3) (4)
Melrose equity-settled compensation scheme charges - (3) (5)
Tax effect of significant restructuring - - (17)
Total adjustments to profit/(loss) after tax (91) 240 399
Adjusted profit after tax 194 160 350
5. Tax
Analysis of the charge/(credit) in the period: 6 months ( )
6 months ended Year ended
31 December
ended 30 June
2024
30 June 2024
£m
2025 £m
£m
Continuing operations
Current tax 7 5 15
Deferred tax 87 (30) (72)
Total tax charge/(credit) 94 (25) (57)
The effective tax rate in respect of adjusted profit before tax for the period
is 21.8% (2024: 21.6%). Adjusted tax has been calculated by applying the
expected tax rate to adjusted profit before tax of £248 million (2024: £204
million), giving an adjusted tax charge of £54 million (2024: £44 million).
The adjusted tax charge of £54 million (2024: £44 million) excludes a tax
charge on adjusting items of £40 million (2024: credit of £69 million)
details of which are shown in note 4.
Other comprehensive income and changes in equity:
In addition to the amount included in the Income Statement, a credit of £5
million (2024: charge of £3 million) has been recognised directly in the
Statement of Comprehensive Income. This represents a tax charge of £1 million
(2024: £3 million) in respect of the remeasurement of retirement benefit
obligations and a tax credit of £6 million (2024: £nil) in respect of
movements on hedge relationships and translation differences. There is also a
tax charge of £3 million (2024: credit of £6 million) recognised directly in
the Statement of Changes in Equity in respect of deferred tax on
equity-settled share-based payments.
6. Earnings per share
Earnings attributable to owners of the parent 6 months 6 months Year ended
31 December
ended ended
2024
30 June 30 June
£m
2025 2024
£m £m
Earnings for basis of earnings per share 285 (80) (49)
6 months ( )
6 months ended Year ended
31 December
ended 30 June
2024
30 June 2024
2025
Number Number Number
Weighted average number of ordinary shares for the purposes of basic earnings
per share (million)
1,279 1,319 1,307
Further shares for the purposes of diluted earnings per share (million) 4 27 17
Weighted average number of ordinary shares for the purposes of diluted
earnings per share (million)
1,283 1,346 1,324
Earnings per share
6 months 6 months
ended ended Year ended
31 December
30 June 30 June
2024
2025 2024
pence
pence pence
Basic earnings per share 22.3 (6.1) (3.7)
Diluted earnings per share 22.2 (6.1) (3.7)
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2025 2024 2024
Adjusted earnings £m £m £m
Adjusted earnings for the basis of adjusted earnings per share 194 160 350
6. Earnings per share (continued)
6 months 6 months
Adjusted earnings per share ended ended Year ended
30 June 30 June 31 December
2025 2024 2024
pence pence pence
Adjusted basic earnings per share 15.2 12.1 26.8
Adjusted diluted earnings per share 15.1 11.9 26.4
( )
7. Dividends
Year ended
6 months 6 months 31 December
ended ended 2024
30 June 30 June £m
2025 2024
£m £m
Final dividend for the year ended 31 December 2023 of 3.5p - 46 46
Interim dividend for the year ended 31 December 2024 of 2.0p - - 26
Final dividend for the year ended 31 December 2024 of 4.0p 51 - -
Total dividends paid 51 46 72
An interim dividend of 2.4 pence per ordinary share is declared by the Board,
totalling £30 million.
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 six month
period ended 30 June 2025, 14,180,323 shares were purchased at an average
price of 504 pence per share for a total cash consideration of £71 million,
inclusive of costs of £nil.
8. Disposals
During the period, the Group disposed of its 1% investment in Dowlais Group
plc for consideration of £9 million. In the prior period, 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.
9. Provisions
Loss-making contracts Property related costs Environmental and litigation Warranty related costs Restructuring Total
£m £m £m £m £m Other £m
£m
At 1 January 2025 28 25 50 24 27 30 184
Utilised (5) - (3) (1) (22) - (31)
Charge to operating profit((1)) 1 2 7 1 11 1 23
Release to operating profit((2)) - - (1) - - (1) (2)
Exchange adjustments (1) (2) (1) (2) - (3) (9)
At 30 June 2025 23 25 52 22 16 27 165
Current 10 5 22 12 16 25 90
Non-current 13 20 30 10 - 2 75
23 25 52 22 16 27 165
( )
((1)) Includes £12 million of adjusting items and £11 million recognised in
adjusted operating profit.
((2)) Includes £nil of adjusting items and £2 million recognised in adjusted
operating profit.
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.
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.
Environmental provisions relate to the estimated remediation costs of
pollution and groundwater contamination at certain sites and at 30 June 2025
amounted to £7 million (31 December 2024: £8 million). At 30 June 2025,
litigation provisions amounting to £45 million (31 December 2024: £42
million) relate to estimated future costs and settlements in relation to legal
claims and associated insurance obligations. Due to their nature, it is not
possible to predict precisely when these provisions will be utilised.
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 are subsequently updated for changes in estimates as necessary. Warranty
terms are, on average, between one and five years.
Restructuring provisions relate to committed costs in respect of restructuring
programmes which are expected to result in cash spend within the next 12
months.
Other provisions include indemnities and the employer tax on equity-settled
compensation schemes which are expected to result in cash expenditure over the
next two years.
10. Financial instruments
The table below sets out the Group's accounting classification of each
category of financial assets and liabilities and their carrying values as at
30 June 2025, 30 June 2024 and 31 December 2024:
Current Non-current Total
£m £m £m
30 June 2025
Financial assets
Classified as amortised cost:
Cash and cash equivalents 124 - 124
Net trade receivables 393 - 393
Classified as fair value:
Investments - 59 59
Derivative financial assets:
Foreign currency forward contracts 39 104 143
Interest rate swaps 1 - 1
Embedded derivatives 2 1 3
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings (53) (1,475) (1,528)
Government refundable advances (4) (42) (46)
Lease obligations (33) (236) (269)
Other financial liabilities (897) (50) (947)
Classified as fair value:
Derivative financial liabilities:
Foreign currency forward contracts (17) (11) (28)
Interest rate swaps (1) (8) (9)
Embedded derivatives (1) (1) (2)
30 June 2024
Financial assets
Classified as amortised cost:
Cash and cash equivalents 189 - 189
Net trade receivables 406 - 406
Classified as fair value:
Investments - 118 118
Derivative financial assets:
Foreign currency forward contracts 7 11 18
Interest rate swaps - 7 7
Embedded derivatives 3 5 8
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings (84) (1,081) (1,165)
Government refundable advances (8) (45) (53)
Lease obligations (31) (151) (182)
Other financial liabilities (804) (104) (908)
Classified as fair value:
Derivative financial liabilities:
Foreign currency forward contracts (53) (75) (128)
Embedded derivatives (1) (2) (3)
31 December 2024
Financial assets
Classified as amortised cost:
Cash and cash equivalents 88 - 88
Net trade receivables 400 - 400
Classified as fair value:
Investments - 69 69
Derivative financial assets:
Foreign currency forward contracts 7 1 8
Interest rate swaps - 8 8
Embedded derivatives 3 3 6
Financial liabilities
Classified as amortised cost:
Interest-bearing loans and borrowings (8) (1,401) (1,409)
Government refundable advances (6) (45) (51)
Lease obligations (33) (204) (237)
Other financial liabilities (851) (69) (920)
Classified as fair value:
Derivative financial liabilities:
Foreign currency forward contracts (71) (111) (182)
Interest rate swaps - (2) (2)
Embedded derivatives (1) (2) (3)
The fair value of the derivative financial instruments, other than embedded
derivatives, is derived from inputs other than quoted prices that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices) and they are therefore categorised
within level 2 of the fair value hierarchy set out in IFRS 13: Fair Value
Measurement. The embedded derivatives are classified as level 3 fair value
under the IFRS 13 fair value hierarchy. The Group's policy is to recognise
transfers into and out of the different fair value hierarchy levels at the
date of the event or change in circumstances that caused the transfer to
occur. There have been no transfers between levels in the period.
11. Retirement benefit obligations
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.
The most significant defined benefit pension plans in the Group at 30 June
2025 were:
GKN Group Pension Schemes (Numbers 1 and 4)
The GKN Group Pension Schemes (Numbers 1 and 4) are UK funded plans, closed to
new members and closed to future accrual. The valuation of the plans was based
on a full actuarial valuation as of 5 April 2022, updated to 30 June 2025 by
independent actuaries.
GKN US Consolidated Pension Plan
The GKN US Consolidated Pension Plan is a funded plan, closed to new members
and closed to future accrual. The US Pension Plan valuation was based on a
full actuarial valuation as of 1 January 2025, updated to 30 June 2025 by
independent actuaries.
The cost of the Group's defined benefit plans is determined in accordance with
IAS 19 (revised): Employee Benefits using the advice of independent
professionally qualified actuaries on the basis of formal actuarial valuations
and using the projected unit credit method. In line with normal practice,
these valuations are undertaken triennially in the UK and annually in the US.
The amount recognised in the Balance Sheet in respect of defined benefit plans
was as follows:
30 June 2025 UK plans((1)) US plans Other plans
£m £m £m Total
£m
Plan assets 936 28 - 964
Plan liabilities (959) (49) (8) (1,016)
Net liabilities (23) (21) (8) (52)
UK plans((1)) US plans Other plans Total
£m £m £m £m
30 June 2024
Plan assets 1,006 31 - 1,037
Plan liabilities (1,063) (56) (8) (1,127)
Net liabilities (57) (25) (8) (90)
UK plans((1)) US plans Other plans Total
31 December 2024 £m £m £m £m
Plan assets 955 31 - 986
Plan liabilities (983) (54) (8) (1,045)
Net liabilities (28) (23) (8) (59)
((1)) Includes a liability in respect of post-employment medical plans of £6
million (30 June 2024: £6 million, 31 December 2024: £6 million).
Valuations of material plans have been updated at 30 June 2025 by independent
actuaries to reflect updated assumptions regarding discount rates, inflation
rates and asset values. The major assumptions were as follows:
Rate of increase of pensions in payment Discount rate Price inflation
% p.a. % (RPI/CPI) %
30 June 2025
GKN Group Pension Schemes (Numbers 1 and 4) 2.5 5.6 2.8/2.4
GKN US plans n/a 5.3 n/a
30 June 2024
GKN Group Pension Schemes (Numbers 1 and 4) 2.7 5.1 3.1/2.7
GKN US plans n/a 5.3 n/a
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
In addition, the defined benefit plan assets and liabilities have been updated
to reflect the contributions made to the defined benefit plans and the
benefits earned during the period to 30 June 2025.
12. Notes to the Cash Flow Statement
Restated((1))
Continuing 6 months 6 months Year ended
operations
ended ended 31 December
2024
30 June 30 June
2025
2024 £m
£m £m
Reconciliation of operating profit/(loss) to net cash from/(used in) operating
activities
Operating profit/(loss) 441 (62) (4)
Adjusting items (note 4)((2)) (131) 309 544
Adjusted operating profit 310 247 540
Adjustments for:
Depreciation of property, plant and equipment 51 52 101
Amortisation of computer software and development costs 16 20 41
Restructuring costs paid and movements in provisions (22) (91) (135)
Defined benefit pension contributions paid (2) (2) (20)
Change in inventories (85) (98) (71)
Change in receivables((3)) (200) (218) (449)
Change in payables 11 86 191
Acquisition and disposal costs - (1) (1)
Tax paid (11) (10) (10)
Interest paid on loans and borrowings (48) (35) (84)
Interest paid on lease obligations (5) (3) (6)
Divisional management incentive scheme related payments (7) (19) (20)
Melrose equity-settled compensation scheme related payments - (18) (198)
Net cash from/(used in) operating activities 8 (90) (121)
((1)) The changes in inventories, receivables and payables have been restated
(see note 2).
((2)) The cash impact of adjusting items is detailed in note 4.
((3)) The change in receivables includes increases to unbilled work done of
£219 million (2024: £166 million).
Reconciliation of cash and cash equivalents, net of bank overdrafts
30 June 30 June 31 December
2025
2024
2024
£m £m £m
Cash and cash equivalents per Balance Sheet 124 189 88
Bank overdrafts included within current interest-bearing loans and borrowings
(3) (23) (8)
Cash and cash equivalents, net of bank overdrafts per Statement of Cash Flows
121 166 80
Net debt reconciliation
Net debt consists of interest-bearing loans and borrowings and cash and cash
equivalents.
Net debt is 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 is
given below.
30 June 30 June 31 December
2025
2024
2024
£m £m £m
Interest-bearing loans and borrowings - due within one year (53) (84) (8)
Interest-bearing loans and borrowings - due after one year (1,475) (1,081) (1,401)
External debt (1,528) (1,165) (1,409)
Less:
Cash and cash equivalents 124 189 88
Net debt (1,404) (976) (1,321)
12. Notes to the Cash Flow Statement (continued)
The table below shows the key components of the movement in net debt:
Cash flow Other At
At 1 January 2025 non-cash movements Effect of foreign exchange 30 June
Acquisitions and disposals 2025
£m £m £m £m £m £m
External debt (excluding bank overdrafts and unamortised finance costs)
(1,408) (220) - - 98 (1,530)
Unamortised finance costs 7 1 - (3) - 5
External debt (excluding bank overdrafts) (1,401) (219) - (3) 98 (1,525)
Cash and cash equivalents, net of bank overdrafts
80 38 4 - (1) 121
Net debt (1,321) (181) 4 (3) 97 (1,404)
13. Lease obligations
Amounts payable under lease obligations:
Minimum lease payments 30 June 31 December
2024
2024
30 June
2025 £m £m
£m
Amounts payable:
Within one year 39 35 39
After one year but within five years 128 102 120
Over five years 183 76 146
Less: future finance charges (81) (31) (68)
Present value of lease obligations 269 182 237
Analysed as:
Amounts due for settlement within one year 33 31 33
Amounts due for settlement after one year 236 151 204
Present value of lease obligations 269 182 237
It is the Group's policy to lease certain of its property, plant and
equipment. The average lease term is 13 years. Interest rates are fixed at the
contract date.
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 businesses are performing because this
provides a meaningful comparison of how the business 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 Income Statement and Cash Flow measures are
provided for continuing operations unless otherwise stated.
Closest equivalent Reconciling
statutory measure items to statutory
measure
APM Definition and purpose
Income Statement Measures
Adjusting items None Adjusting items (note 4) 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.
Adjusted operating profit Operating profit/(loss)((1)) Adjusting items (note 4) 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.
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2025 2024 2024
Adjusted operating profit £m £m £m
Operating profit/(loss) 441 (62) (4)
Adjusting items to operating profit/(loss) (note 4)
(131) 309 544
Adjusted operating profit 310 247 540
Adjusted operating margin Operating margin((2)) Adjusting items (note 4) 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 Closest Reconciling Definition and purpose
equivalent items to statutory
statutory measure measure
Adjusted profit before tax Profit/(loss) before tax Adjusting items (note 4) Profit 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.
6 months ended 6 months ended ( )
30 June 30 June Year ended
2025 2024 31 December
£m £m 2024
Adjusted profit before tax £m
Profit/(loss) before tax 379 (105) (106)
Adjusting items to profit/(loss) before tax (note 4)
(131) 309 544
Adjusted profit before tax 248 204 438
Adjusted profit after tax Profit/(loss) after tax Adjusting items (note 4) Profit after tax but before the impact of the 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.
6 months ended 6 months ended
30 June 30 June Year ended
2025 2024 31 December
£m £m 2024
Adjusted profit after tax £m
Profit/(loss) after tax 285 (80) (49)
Adjusting items to profit/(loss) after tax (note 4)
(91) 240 399
Adjusted profit after tax 194 160 350
Constant currency Income Statement, which is reported using actual average foreign exchange Constant currency foreign exchange rates The Group uses GBP based constant currency models to measure performance.
rates These are calculated by applying 2025 six month average exchange rates to
local currency reported results for the current and prior periods. This gives
a GBP denominated Income Statement which excludes any variances attributable
to foreign exchange rate movements.
Adjusted EBITDA and Adjusted EBITDA for banking covenant leverage Operating Adjusting items (note 4), depreciation of property, plant and equipment and Adjusted operating profit for 12 months prior to the reporting date, before
amortisation of computer software and development costs. Adjusted EBITDA for depreciation of property, plant and equipment and before the amortisation of
profit/(loss)((1)) banking covenant leverage also includes an imputed lease charge and other computer software and development costs.
adjustments required for banking covenant leverage((3))
Adjusted EBITDA and Adjusted EBITDA for banking covenant leverage are measures
used by external stakeholders to measure performance.
12 months ended 12 months ended
30 June 30 June Year ended
2025 2024 31 December
£m £m 2024
Adjusted EBITDA and Adjusted EBITDA for banking covenant leverage £m
Adjusted operating profit 603 478 540
Depreciation of property, plant and equipment and amortisation of computer
software and development costs
137 143 142
Adjusted EBITDA 740 621 682
Imputed lease charge (38) (41) (38)
Other adjustments required for banking covenant leverage((3))
1 (10) (15)
Adjusted EBITDA for banking covenant leverage
703 570 629
APM Closest Reconciling Definition and purpose
equivalent items to statutory
statutory measure measure
Adjusted tax rate Effective tax rate Adjusting items, adjusting tax items and the tax impact of adjusting items The income tax charge for the Group excluding adjusting tax items, and the tax
(note 4 and note 5) impact of adjusting items, divided by adjusted profit before tax.
This measure is a useful indicator of the ongoing tax rate for the Group.
6 months ended 6 months
30 June ended Year ended
2025 30 June 31 December
£m 2024 2024
Adjusted tax rate £m £m
Tax (charge)/credit per Income Statement
(94) 25 57
Adjusted for:
Tax effect of adjusting items (note 4)
40 (69) (128)
Tax effect of significant
restructuring - - (17)
Adjusted tax charge (54) (44) (88)
Adjusted profit before tax 248 204 438
Adjusted tax rate 21.8% 21.6% 20.1%
Adjusted basic earnings per share Basic earnings per share Adjusting items (note 4 and note 6) Profit after tax attributable to owners of the parent and before the impact of
adjusting items, divided by the weighted average number of ordinary shares in
issue during the financial period.
The Board considers this to be a key measure of performance when all
businesses are held for the complete reporting period.
Adjusted diluted earnings per share Diluted earnings per share Adjusting items (note 4 and note 6) Profit after tax attributable to owners of the parent and before the impact of
adjusting items, divided by the weighted average number of ordinary shares in
issue during the financial period 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.
Interest cover None Not applicable Adjusted EBITDA calculated for banking covenant leverage (including adjusted
EBITDA from businesses disposed) as a multiple of net interest payable on bank
loans and overdrafts.
This measure is used for bank covenant testing.
12 months ended 12 months
30 June ended Year ended
2025 30 June 31 December
£m 2024 2024
Interest cover £m £m
Adjusted EBITDA for banking covenant leverage
703 570 629
Adjusted EBITDA from businesses disposed in the period
- 28 20
Adjusted EBITDA for interest cover
703 598 649
Interest on bank loans and overdrafts
(104) (64) (91)
Finance income 1 2 3
Net finance charges for covenant purposes
(103) (62) (88)
Interest cover 6.8x 9.6x 7.4x
Closest equivalent Reconciling
statutory measure items to statutory
measure
APM Definition and purpose
Balance Sheet Measures
Working capital Inventories, trade and other receivables less trade and other payables Not applicable 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.
Net debt Cash and cash equivalents less interest-bearing loans and borrowings Reconciliation of net debt (note 12) 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.
Bank covenant definition of net debt at average rates and banking covenant Cash and cash equivalents less interest-bearing loans and borrowings Impact of foreign exchange Net debt (as above) is presented in the Balance Sheet translated at period end
leverage 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. This measure is
used for bank covenant testing.
Bank covenant definition of net debt at average rates and banking covenant 30 June 30 June 31 December
leverage
2025 2024 2024
£m £m £m
Net debt at closing rates (note 12) 1,404 976 1,321
Impact of foreign exchange 60 4 (16)
Bank covenant definition of net debt at average rates
1,464 980 1,305
Banking covenant leverage 2.1x 1.7x 2.1x
Leverage None None Leverage is calculated as 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.
30 June 30 June 31 December
Leverage 2025 2024 2024
Leverage 2.0x 1.6x 1.9x
Closest equivalent Reconciling
statutory measure items to statutory
APM measure Definition and purpose
Cash Flow Measures
Adjusted operating cash flow Net cash from/(used in) operating activities Non-working capital items (note 12) and the repayment of principal under lease Adjusted operating cash flow is calculated as net cash from/(used in)
obligations 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 after the
repayment 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.
( )
6 months ended 6 months ended ( )
30 June 30 June Year ended
2025 2024 31 December
£m £m 2024
Adjusted operating cash flow £m
Net cash from/(used in) operating activities
8 (90) (121)
Operating activities:
Restructuring costs paid and movements in provisions((4))
17 75 112
Defined benefit pension contributions paid
2 2 20
Tax paid 11 10 10
Interest paid on loans and borrowings 48 35 84
Interest paid on lease obligations 5 3 6
Acquisition and disposal costs - 1 1
Divisional management incentive scheme related payments
7 19 20
Melrose equity-settled compensation scheme related payments
- 18 198
Debt related:
Repayment of principal under lease obligations
(17) (19) (32)
Adjusted operating cash flow 81 54 298
Closest equivalent Reconciling
statutory measure items to statutory
APM measure Definition and purpose
Free cash flow Net increase in cash and cash equivalents (net of bank overdrafts) Acquisition and disposal related cash flows, dividends paid to owners of the Free cash flow represents cash generated after all trading costs including
parent, transactions in own shares, payments made in respect of equity-settled restructuring, pension contributions, tax and interest payments.
compensation schemes and movements on borrowing facilities
This measure provides additional useful information in respect of cash
generation and is consistent with how business performance is measured
internally.
6 months ended 6 months ended
30 June 30 June Year ended
2025 2024 31 December
£m £m 2024
Free cash flow £m
Net increase in cash and cash equivalents (net of bank overdrafts)
42 109 30
Debt related:
Repayments of borrowings - - 10
Drawings on borrowing facilities (220) (512) (767)
Costs of raising debt finance 1 3 3
Equity related:
Dividends paid to owners of the parent
51 46 72
Purchase of own shares, including associated costs
71 246 431
Melrose equity-settled compensation
scheme related payments - 18 198
Acquisition and disposal related:
Acquisition of subsidiaries 5 - -
Disposal of investments (9) - -
Disposal of businesses, net of cash disposed
- (56) (55)
Equity accounted investment additions
- - 3
Acquisition and disposal costs - 1 1
Other 5 - -
Free cash flow (54) (145) (74)
Adjusted free cash flow Net increase in cash and cash equivalents (net of bank overdrafts) Free cash flow, as defined above, adjusted for restructuring costs paid Adjusted free cash flow represents free cash flow adjusted for restructuring
costs paid.
This measure provides additional useful information in respect of cash
generation and is consistent with how business performance is measured
internally.
( )
6 months ended 6 months ended ( )
30 June 30 June Year ended
2025 2024 31 December
£m £m 2024
Adjusted free cash flow £m
Free cash flow (54) (145) (74)
Restructuring costs paid 17 85 126
Adjusted free cash flow (37) (60) 52
Adjusted free cash flow
Net increase in cash and cash equivalents (net of bank overdrafts)
Free cash flow, as defined above, adjusted for restructuring costs paid
Adjusted free cash flow represents free cash flow adjusted for restructuring
costs paid.
This measure provides additional useful information in respect of cash
generation and is consistent with how business performance is measured
internally.
( )
6 months ended 6 months ended ( )
30 June 30 June Year ended
2025 2024 31 December
£m £m 2024
Adjusted free cash flow £m
Free cash flow (54) (145) (74)
Restructuring costs paid 17 85 126
Adjusted free cash flow (37) (60) 52
Closest equivalent Reconciling
statutory measure items to statutory
APM measure Definition and purpose
Free cash flow pre-interest and tax Net increase in cash and cash equivalents (net of bank overdrafts) Free cash flow, as defined above, adjusted for interest and tax cash flows 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.
( )
6 months ended 6 months ended ( )
30 June 30 June Year ended
2025 2024 31 December
£m £m 2024
Free cash flow pre-interest and tax £m
Free cash flow (54) (145) (74)
Tax paid 11 10 10
Interest paid on loans and borrowings
48 35 84
Interest paid on lease obligations 5 3 6
Interest received - (2) (3)
Free cash flow pre-interest and tax
10 (99) 23
Capital expenditure (capex) None Not applicable Calculated as the purchase of owned property, plant and equipment and computer
software and expenditure on capitalised development costs during the period,
excluding any assets acquired as part of a business combination.
Net capital expenditure is capital expenditure net of proceeds from disposal
of property, plant and equipment.
Capital expenditure to depreciation ratio None Not applicable Net capital expenditure divided by depreciation of owned property, plant and
equipment and amortisation of computer software and development costs.
Capital expenditure (capex)
None
Not applicable
Calculated as the purchase of owned property, plant and equipment and computer
software and expenditure on capitalised development costs during the period,
excluding any assets acquired as part of a business combination.
Net capital expenditure is capital expenditure net of proceeds from disposal
of property, plant and equipment.
Capital expenditure to depreciation ratio
None
Not applicable
Net capital expenditure divided by depreciation of owned property, plant and
equipment and amortisation of computer software and development costs.
( )
((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
in all periods presented are unrealised savings from spend incurred in the
period on restructuring projects of £1 million (2024: £18 million) offset by
adjusted operating profit, depreciation and an imputed lease charge in respect
of businesses disposed in the previous 12 months of £nil (2024: £28
million).
((4)) Excludes non-cash utilisation of loss-making contract provisions of £5
million (2024: £16 million).
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