REG - Melrose Industries - Trading Statement

Melrose IndustriesAnnouncement

16/11/2023 07:00

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RNS Number : 6187T  Melrose Industries PLC  16 November 2023

 

16 November 2023

 

 

                            MELROSE INDUSTRIES PLC

 

Trading Update

Strong growth, upgrading profit, higher margins

 

 

Melrose Industries PLC ("Melrose") announces the following trading update for
the four months from 1 July 2023 to 31 October 2023 ("the Period") and gives
upgraded guidance for the 2023 full year and a first guide for 2024.  All
numbers are calculated at constant currency(1).

 

Current trading - better than previous expectations

 

·     Melrose is trading ahead of expectations

·     Strong revenue growth of 18%(2) in the Period, with underlying
demand higher

·     The margin performance in the Period is substantially better than
expectations, driven by higher aftermarket demand and pricing, and the
successful delivery of operational improvements

Engines trading in the Period - margins comfortably exceed 25%

 

Engines revenue continues to grow at 18% and adjusted(3) operating margins in
the Period were comfortably in excess of 25%.  This strong performance is
driven by good aftermarket trading, up 24% in the Period, from higher volumes,
increased scope and positive pricing.  Engine OE volumes continue to
increase, albeit they are constrained by industry OEM supply chain issues
which are ongoing.  Given the higher profitability of aftermarket, the
resulting business mix is generating stronger margins and this shows no signs
of slowing down.

Structures trading in the Period - margins exceed 4%

Revenue growth was 17%(2) in the Period and adjusted(3) operating margins have
risen above 4%, ahead of the previous guidance.  This is primarily due to
business improvement projects progressing faster than expected.  In
particular, restructuring benefits from global plant consolidation are coming
through and the repricing of contracts is ahead of plan.  As a result, the
division has positive momentum and is improving the quality of its earnings.

 

New 2023 full year guidance(1) - a 7% profit upgrade to previous expectations;
stronger margins

 

·    Revenue of between £3.3 billion and £3.4 billion

·    Aerospace adjusted(3) operating profit(4) between £400 million and
£410 million

·    Aerospace adjusted(3) operating margin over 12%

·    Aerospace adjusted(3) EBITDA(4) between £545 million and £555
million

 

Expected full year revenue demand and growth continue to be strong at 18%(2)
year over year.  Due to the stronger underlying margins being achieved, the
2023 full year profit expectations are upgraded by 7%, more than doubling
profits compared to last year.  This reflects ongoing confidence in the
performance of the business with Engines full year margins now expected to be
25% and Structures margins 4% or more.

 

Free cashflow(5) and net debt, including the share buyback programme which
commenced in October, are in line with expectations, with year end leverage(3)
expected to be c.1.3x.

 

First guide to 2024(1) - adjusted(3) operating profit c.4% better than market
expectations(6)

 

·    Revenue of between £3.5 billion(7) and £3.7 billion(7)

·    Aerospace adjusted(3) operating profit(4) between £520 million and
£540 million

·    Aerospace adjusted(3) operating margin c.15%

·    Aerospace adjusted(3) EBITDA(4) between £680 million and £700
million

 

The first guide to 2024 adjusted(3) operating profit performance is c.4%
better than market expectations(6) even whilst prudently assuming that demand
will continue to be constrained by supply.  Growth will become higher when
these ease.  In addition, significant operational improvements are on track
in both Engines and Structures to enhance margins further.

 

Including the cash impact arising from the recent announcements about the GTF
Engine, ongoing restructuring spend, and the announced £500 million share
buyback programme, Melrose expects leverage(3) in 2024 to be comfortably below
2x, better than the previous medium term leverage guidance.

 

These higher expectations for 2023 and 2024 announced today, along with the
recent signing of the new GE deal announced on 6 November 2023, show the
guidance given in the Capital Markets Event on 17 May 2023 is being exceeded
and the stated 2025 profit targets are substantially more underpinned than
before.

 

 

Simon Peckham, Chief Executive of Melrose said:

 

"It is a pleasure to hand over Melrose so well positioned for the future.
2024 will be another year of strong progress under its new leadership as the
targets announced in the Capital Markets Event come into sight."

 

 

1.    Calculated using a foreign exchange rate of £1 = US$1.25

2.    Excluding revenue from planned site closures

3.    Described in the glossary to the Melrose Industries PLC Interim
Financial Statements and considered by the Board to be a key measure of
performance

4.    Excluding PLC central costs

5.    Free cashflow, post-central costs but before interest and tax

6.    Per company compiled consensus of twelve analysts, being £510
million adjusted(3) operating profit for 2024

7.    After exiting c.£150 million of sales as planned, over the period
from the Capital Markets Event on 17 May 2023 to the end of 2024

 

-ends-

 

 

 

Enquiries:

Investor Relations: Chris Dyett +44 (0) 7974 974690

ir@melroseplc.net (mailto:ir@melrosePLC.net)

 

Montfort Communications: +44 (0) 20 3514 0897

Nick Miles +44 (0) 7739 701634 / Charlotte McMullen +44 (0) 7921 881800

miles@montfort.london (mailto:miles@montfort.london) /
mcmullen@montfort.london (mailto:mcmullen@montfort.london)

 

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