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- Melrose expects to earn between £550m and £570m in adjusted operating profits this year
- Boeing and Airbus have been hit by parts shortages and delivery delays.
Melrose Industries Stock were the top performers on Monday after the company reaffirmed its full-year guidance despite industry-wide supply chain issues.
The owner of FTSE 100 GSK Aerospace said it still expects to earn between £550m and £570m in adjusted operating profits this year, followed by £700m in 2025.
Aeronautical giants Boeing and Airbus have been hit by parts shortages and delivery delays, partly driven by difficulties meeting the post-pandemic rebound in air travel.
Boeing’s problems have been further exacerbated by safety problems with its 737 MAX aircraft and the recent strike of 33,000 machinists in the United States.
Melrose’s structures business saw turnover rise by just 1 per cent year-on-year in the four months to October due to these issues, as well as reduced customer stock and reduced ancillary work.
However, strong demand from the defense industry boosted its engine division’s revenue by almost a third over the same period.
Jump: Melrose Industries shares were the top performer on Monday after the company reaffirmed its full-year profit outlook.
Following this update, Melrose Industries shares rose 6.9 per cent to 523.4p on Monday afternoon, although they are down around 6 per cent so far this year.
Peter Dilnot, Melrose’s chief executive, said the company’s outlook “reflects the strength of our businesses and the balanced position we have with our aftermarket offsetting original equipment headwinds.”
He added: “As we move towards 2025, we enter a period of significant and sustained growth in our cash flow for many years to come.”
Melrose anticipates its cash flow will increase “significantly” next year and “materially beyond,” thanks in part to cash generation from its venture and revenue-sharing partnerships.
It also said cash flow would benefit from its restructuring programs and resolution of issues related to aircraft engines made by Pratt & Whitney.
Airlines including Wizz Air, JetBlue and IndiGo have been forced to ground their planes as aerospace manufacturer Pratt & Whitney recalled thousands of its geared turbofan engines amid concerns about contaminated metal parts.
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: ‘Supply chain issues have been a challenge for the entire industry and the problem is likely to persist for some time.
‘However, Melrose is using other levers to streamline operations and offset this impact.
“The ongoing restructuring program is almost complete and should result in a significantly reduced burden on its cash resources in the new year.”
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