GKN Aerospace owner Melrose shares surge on positive cash flow outlook
Forecasts substantial free cash flow in 2025
Four-month adjusted operating profit continued to grow year-on-year
Shares rise as much as 9% to the top of FTSE100
Adds share move, detail of operations, analysts quotes
Nov 18 (Reuters) -Melrose Industries MRON.L, owner of aerospace parts maker GKN Aerospace, said on Monday it expects to deliver substantial free cash flow in 2025, thanks to its restructuring as well as cash generation from its Risk and Revenue Sharing Partnerships and the resolution of an issue with some engine parts.
Melrose shares rose as much as 9% as it also reported a 7% rise in revenue for the four months ended Oct. 31, helped by strength in its aftermarket business.
Prolonged production delays at crisis-stricken Boeing BA.N have hurt the pace of commercial jet production sector-wide, burdening an already strained supply chain.
The delays have also pushed airlines to extend the usage of older planes, boosting demand for aftermarket services and parts, a business that Melrose considers its most profitable one.
Melrose shares, which have fallen about 7% this year, have had some respite after the group clarified certain aspects of its Risk and Revenue Sharing Partnerships (RRSPs) in a document last month, prompting confidence among investors about its future cash flow.
"Looking further ahead, there are some tailwinds blowing in its favour. Contract repricing and new commercial agreements mean there’s room for growth to really step up in the near-to-medium term," Hargreaves Lansdown analyst Aarin Chiekrie said.
Shares in Melrose were up 8.3% at 530 pence by 1001 GMT, at the top of London's benchmark index .FTSE.
Stifel analysts said combined with the strong momentum at the group's engines aftermarket, the cash flow outlook should continue to offer reassurance which started with the publication of the RRSP booklet.
Melrose, which spun off its auto and other businesses last year to become a pure-play aerospace supplier, kept its full-year expectations unchanged, with adjusted operating profit at 550 million pounds to 570 million pounds ($694.76 million-$720.02 million).
The company said its adjusted operating profit continued to grow year-on-year in the four-month period, in line with its expectations.
($1 = 0.7916 pounds)
Reporting by Yamini Kalia and Yadarisa Shabong in Bengaluru; Editing by Subhranshu Sahu and Susan Fenton
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
