Melrose Industries (MRO) H2 2025 earnings summary

Executive summary

• Achieved strong 2025 performance with 8% revenue growth to £3.6bn, 240bps margin expansion, and 23% increase in operating profit to £647m, driven by Engines and Defence segments.

• Completed multi-year transformation, focusing on core, design-led businesses, rationalizing footprint from over 50 to around 30 sites, and exiting non-core businesses.

• Delivered positive free cash flow of £125m, a £199m improvement year-over-year, marking a key inflection point.

• Record demand in civil and defence markets, with established positions on leading aircraft and engines.

• Announced new £175m share buyback, reflecting confidence in achieving 2029 targets of £5bn revenue, 24%+ margin, £1.2bn+ operating profit, and £600m free cash flow.

Financial highlights

• Group revenue up 8% year-over-year to £3,589m, led by Engines (+15%) and Airframes (+3%).

• Operating profit up 23% to £647m; margin up to 18% (+240bps).

• EPS up 25% to 32.1p; final dividend of 4.8p/share, full-year dividend up 20% to 7.2p.

• Free cash flow of £125m, a £200m improvement from prior year, with strong trade working capital performance.

• Net debt at £1,407m; leverage at 1.8x net debt/EBITDA.

Outlook and guidance

• 2026 revenue guidance: £3.75bn–£3.95bn (midpoint ~10% growth), with Engines expected to maintain double-digit growth and Airframes high single-digit growth.

• Operating profit guidance: £700m–£750m (midpoint margin ~19%).

• Free cash flow guidance for 2026: £150m–£200m, weighted to H2; leverage to remain below 2.0x.

• 2029 targets reaffirmed: £5bn revenue, 24%+ margin, £1.2bn+ operating profit, £600m free cash flow.

• Committed to growing annual dividend and launching a £175m share buyback.