Melrose Industries (MRO) H1 2026 earnings summary

Executive summary

• Achieved strong H1 2026 results with 10% revenue growth to £1,873 million and 16% operating profit increase, supported by robust demand in both civil and defense aerospace markets.

• Engines division led growth with 19% revenue increase, while Airframes grew 4%, driven by Defense; margin expansion achieved.

• Free cash flow improved by £67 million year-over-year to £13 million; leverage maintained at 1.8x EBITDA.

• Incident at Garden Grove led to temporary production halt, ongoing regulatory/legal processes, and a pause in the share buyback program.

• Interim dividend increased 13% to 2.7p per share.

Financial highlights

• Group revenue up 10% year-over-year to £1.9bn; operating profit up 16% to £347 million; operating margin up 50bps to 18.5%.

• Adjusted diluted EPS rose 22% to 17.7p; free cash flow of £13 million in H1, a £67 million improvement year-over-year.

• Dividend per share increased 13% to 2.7p; leverage reduced to 1.8x EBITDA.

• H1 results impacted by Garden Grove: revenue and profit £16 million and £9 million lower, respectively; exceptional costs of £13 million incurred.

• Excluding Garden Grove, revenue and profit growth were 11% and 19% respectively, with margin expansion in both divisions.

Outlook and guidance

• Full-year 2026 guidance (excluding Garden Grove impact): revenue £3.75–£3.95 billion, operating profit £700–£750 million, free cash flow £150–£200 million, margins c.19%.

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

• Garden Grove incident expected to impact H2 revenue by £6 million per month until full production resumes; exceptional costs in H2 anticipated at £25–£30 million.

• Medium-term target: £600 million free cash flow by 2029.