Melrose upbeat after annual results top forecasts

7th Mar 2024 07:45

(Sharecast News) - Melrose Industries reported above-forecast annual results on Thursday, after the aerospace specialist benefited from an upturn in the aviation sector.

The engineering firm reported a 17% jump in revenues in the year to December end to £3.35bn, ahead of analyst expectations.

Aerospace operating profits more than doubled, rising to £420m from £186m, also above guidance.

Pre-tax profits were £331m, up from £62m a year previously, while statuary group losses narrowed to £8m from £328m.

Melrose said: "Our end markets continue to recover strongly and look set for sustained structural growth in the years ahead.

"The demand is compounded by the fact that over the last four years, there was a significant reduction in aerospace deliveries due to Covid and the well-publicised issues with the Boeing 737 Max."

However, it also acknowledged supply chain issues and raw material shortages continued, leading to a "mismatch" between supply and demand.

Peter Dilnot, chief executive, 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 delivered 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."

Melrose expects to deliver adjusted operating profits, pre-central costs, of between £500m and £570m in the current year.

Revenues were forecast to come in between £3.6bn and £3.75bn in 2024, although it noted that growth would be "tempered" by ongoing sector-wide supply issues.

As at 1100 GMT, the blue chip - which has put on more than 85% in the last year - was down nearly 5% at 603p.

Melrose demerged its GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen units into Dowlais Group last April, leaving it focused exclusively on the aerospace through two divisions, engines and structures.