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Melrose Industries has raised its annual profit forecast even after doubling earnings last year as the FTSE 100 aerospace group rides the global rebound in aviation.
The company, which has pivoted away from turning around underperforming industrials businesses to concentrate on aerospace, upgraded its profit guidance by 6 per cent for this financial year on Thursday.
Melrose is now expecting to make adjusted operating profit of between £550mn and £570mn in 2024. The higher forecast came even as the group, which spun off its automotive division last year, boosted operating profits from its continuing operations to £420mn for the year to end December 2023, up from £186mn the previous year. Revenues rose to £3.3bn, from £2.9bn, ahead of analysts’ expectations.
Shares in the company have soared more than 85 per cent over the past 12 months amid a global boom in aviation following the Covid-19 pandemic. Melrose’s GKN aerospace business is a leading supplier of airframe structures for Airbus and Boeing, as well as of engine components.
The group originally listed on London’s Aim in 2003 to turn around industrial businesses under a “buy, improve, sell” approach, but last year abandoned that strategy to concentrate on its growing aerospace business.
The company’s founders, including chief executive Simon Peckham, last year announced their intention to step down in 2024. Melrose on Thursday confirmed that Peckham had stepped down as chief executive earlier this week. Peter Dilnot, who was chief operating officer, has taken over as CEO.
Dilnot said the group was “well positioned” to deliver “continued growth and margin improvement”.
However Melrose warned of continuing headwinds from industry-wide supply chain challenges and the “well-publicised issues with the Boeing 737 Max”. The US aircraft maker has been forced to put on hold the planned production increase of its best-selling model as federal investigators probe the mid-flight blowout of a door panel on a 737 Max operated by Alaska Airlines.
Melrose shares fell 5 per cent in early trading on Thursday.
The industry’s supply chain was also “pacing deliveries due to capacity and raw material shortages”, Melrose said. This dynamic “continues to create a mismatch between supply and demand, and backlogs have increased in 2023 in our key markets”, it added.
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