Melrose Industries (MRO) H1 2024 earnings summary

Executive summary

• H1 2024 operating profit rose 62% year-over-year, with margins up 450 bps, outperforming expectations.

• Revenue increased 12% year-over-year, driven by Engines aftermarket and business improvements.

• Engines division delivered 21% revenue growth and 46% increase in operating profit; Structures saw 6% revenue growth and 89% rise in operating profit.

• Announced additional £250m share buyback and interim dividend up 33% to 2.0p per share.

• Maintained positive outlook and full-year guidance despite supply chain challenges.

Financial highlights

• Revenue reached £1,742m, up 12% year-over-year (excluding exited businesses).

• Adjusted operating profit rose to £247m (H1 2023: £159m); adjusted EBITDA (pre-PLC costs) was £331m, up 39%.

• Diluted EPS increased 65% to 11.9p; interim dividend raised 33% to 2.0p per share.

• Net debt at 30 June 2024: £976m; leverage at 1.7x after share buybacks.

• Free cash flow was -£145m, impacted by working capital and restructuring outflows.

Outlook and guidance

• 2024 revenue guidance: £3,600–3,750m; 2025 target: £3,800m.

• 2024 adjusted operating profit guidance: £550–570m; 2025 target: £700m.

• Group margin target raised to >18% for 2025, with Engines expected to exceed 28% and Structures >9%.

• Free cash flow expected to increase in 2025 and beyond as restructuring winds down.

• Double-digit annual EPS growth targeted over the long term.