Melrose Industries (MRO) investor relations material

Executive summary

• Achieved strong H1 2026 results with 10% revenue growth to £1,873 million and 16% operating profit increase, driven by robust demand in civil and defense aerospace markets, despite the Garden Grove incident.

• Engines division led with 19% revenue growth, while Airframes grew 4%, supported by defense platforms; productivity and margin improvements noted.

• Incident at Garden Grove caused a temporary production halt, reducing H1 revenue by £16 million and profit by £9 million; no injuries or contamination, with operations partially restored and regulatory engagement ongoing.

• Continued execution of a three-wave growth strategy, including investments in next-generation technologies and operational improvements.

• Free cash inflow of £13 million, a £67 million improvement year-over-year; interim dividend increased 13% to 2.7p per share.

Financial highlights

• Group revenue up 10% year-over-year to £1.9bn; Engines division revenue up 19% to £896m, Airframes up 4% to £977m.

• Operating profit rose 16% to £347 million; H1 margin increased by 50 bps to 18.5%.

• Adjusted diluted EPS up 22% to 17.7p; free cash flow of £13 million; leverage at 1.8x EBITDA.

• Dividend per share increased 13% to 2.7p; net debt at £1,530 million at June end.

• Garden Grove incident reduced H1 revenue and profit by £16 million and £9 million, with exceptional costs of £13 million.

Outlook and guidance

• Full-year 2026 guidance (excluding Garden Grove): revenue £3.75–£3.95 billion (c.10% growth), operating profit £700–£750 million (c.16% growth), and free cash flow £150–£200 million.

• Engines expected to deliver £1,700–£1,800 million revenue and £565–£595 million adjusted operating profit; Airframes to deliver £2,050–£2,150 million revenue and £170–£190 million profit.

• Garden Grove expected to operate at 50% of normal monthly revenue in H2, impacting profit and cash by £6 million per month; exceptional H2 costs anticipated at £25–£30 million.

• Long-term free cash flow target of £600 million in 2029 reaffirmed.