Melrose upgrades guidance as profits surge amid board shifts
Melrose has upgraded its 2024 guidance after more than doubling its operating profit to £420m.
The aerospace giant is expecting profits between £550m and £570m in 2024 (pre its PLC costs), a 6% increase on its expectations at the midpoint. Profits are being bolstered by its Engines division that’s on track to deliver margin targets of 28% a year early.
Its results mark the completion of a transformational period for Melrose, following the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses into Dowlais Group – which as a standalone business has a market value of £1.6bn.
The move to become a “premium” listed aerospace business has caused some board changes. Melrose will now be led by new CEO Peter Dilnot, after five years at the firm serving as COO, executive Director, and CEO of GKN Aerospace. The ex-helicopter pilot in the army was previously CEO of waste management firm Renewi and senior executive at life sciences conglomerate Danaher Corporation.
Dilnot is joined by Matthew Gregory, previously CFO of GKN Aerospace, who has been added to the board as executive director and has become Melrose’s CFO. Gregory has executive leadership experience across several complex, UK-listed manufacturing and transportation businesses, including as CFO of Essentra and CEO of FirstGroup.
The shake-up comes after September’s announcement, that two of the co-founders of Melrose were to stand down after 20 years.
Executive vice-chairman Chris Miller, and chief executive Simon Peckham alongside finance director Geoffrey Martin have now stepped down over the last week. It was announced today that non-executive director Victoria Jarman has also decided not to stand for re-election at the 2024 AGM on May 2.
After reporting a 17% boost to revenue over the last year, and 13% of the £3.35bn was from the exited businesses, Melrose now anticipates revenue between £3.6bn and £3.75bn with growth tempered by ongoing sector-wide supply chain issues.
£120m of investment in research and development from government and customer funding has been made, as well as £50m to expand its unique additive fabrication capacity during the next couple of years.
In November, Melrose announced a $5bn agreement with global aerospace engines market leader GE Aerospace. The pair will work on the GEnx programme – its fastest-selling high-thrust engine. It’s expected that GKN Aerospace sales from the agreement are estimated at around $5bn over the full 30-year plus life of the GEnx engine.
Peter Dilnot, Chief Executive Officer of Melrose Industries said: “Melrose Aerospace has delivered record results in 2023, ahead of upgraded guidance driven by strong operating margin progression in both divisions. The Group is well positioned to deliver continued growth and margin improvement supported by positive end markets and excellent operational momentum. We have upgraded guidance for 2024 and are confident about unlocking significant further potential of the business going forward.”
