Melrose Industries Plc · LSE:MRO
Melrose Industries — FY2024 Earnings Presentation
36 slides from Melrose Industries's earnings presentation, Mar 6, 2025
Slide 1: Full Year Results, Year ended 31 December 2024
Melrose Industries PLC Full Year Results Year ended 31 December 2024 6 March 2025
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by or on behalf of Melrose Industries PLC (“Melrose”). The information set out in this presentation is not intended to form the basis of any contract. By attending (whether in person, by telephone or webcast) the presentation to which this document rela
Slide 3: Highlights
Highlights 2024 Results and 2025 Guidance 5 Year Targets Full Year Results 3
Slide 4: Highlights
Highlights Strong 2024 Performance 1 Profit at top end of expectations despite industry-wide supply chain issues Positive Momentum into 2025 2 Continued profit growth, completion of transformational restructuring and substantial positive free cash flow New 5 Year Targets 3 Delivering strong revenue
Slide 5: Strong 2024 Performance
1 Strong 2024 Performance Financial Highlights Operational Improvements Organic Growth Initiatives Garden Grove expansion 1 11% increase in 80% Secured over £100m funding for Reduction in LTAs2 new production line to double F-35 revenue to £3.47bn canopy capacity New repairs site in San Diego 11% Le
Slide 6: Positive Momentum into 2025
2 Positive Momentum into 2025 Transformational Inflection Point for Cash Strong Profitable Growth Restructuring Generation 1 Completing integrations Free cash flow £m ~7% and finalising (after interest and tax)3 Revenue growth restructuring projects 100+ 2 Delivering productivity ~£130m Aerospace op
Slide 7: 5 Year Targets
3 5 Year Targets 1 2 Revenue Operating Profit Free Cash Flow ~£5bn £1.2bn+ £600m 3 HSD CAGR Margin up to 24%+ And growing beyond 4 >20% EPS CAGR Financial targets for the year ended 31 December 2029; growth metrics are compound annual growth rates from the year ended 31 December 2024 to the year end
Slide 8: 2024 Results and 2025 Guidance
Highlights 2024 Results and 2025 Guidance 5 Year Targets Full Year Results 8
Slide 9: Results Overview: Profit at Top End of Expectations
Results Overview: Profit at Top End of Expectations Revenue growth continues to be strong, led by the Engines division due to buoyant aftermarket Adjusted1 results Growth Industry supply chain issues persist impacting OEM build rates £m 2024 vs 2023 and Melrose operations Revenue 3,468 11%2 Aerospac
Slide 10: Divisional Overview
Divisional Overview Growth vs 2023 Adjusted1 results 2024 Operating Operating Operating Operating £m Revenue profit margin Revenue profit margin Engines 1,459 422 28.9% 26% 40% 2.9ppts Structures 2,009 144 7.2% 3%2 32% 2.1ppts Aerospace 3,468 566 16.3% 11%2 38% 3.8ppts PLC costs - (26) n/a - (14%) n
Slide 11: Engines: Results
Engines: Results REVENUE (£m) REVENUE SPLIT AND 2024 GROWTH % Revenue growth of 26% is driven by strong 1,459 aftermarket (‘AM’) growth of 32% with OE growing by 26% 19% 1,193 AM revenue growth was driven by military (74%), parts repair (18%) and RRSPs (30%). RRSP revenue includes total variable con
Slide 12: Structures: Results
Structures: Results REVENUE (£m) Continuing Exited businesses REVENUE SPLIT AND 2024 GROWTH1 % Revenue growth of 3%1 driven largely by improved 2,157 commercial terms and offset by volume constraints 2,009 3%1 Volumes constrained by delays to customer delivery ramp-up due to industry-wide supply cha
Slide 13: Margin Expansion Levers: Path to 2025
Margin Expansion Levers: Path to 2025 2025 targets Progress to date Engines well ahead of plan; target already exceeded >32% Lever Status Details 1% 1% 28% 4% 28.9% Delivered ahead of plan due to better mix of strong 22% 3 2024 2 Results 1 RRSP contribution profitable aftermarket, with flight ho
Slide 14: Results Overview: 2024 Statutory Results
Results Overview: 2024 Statutory Results Adjusting operating items were principally amortisation of Adjusted1 Statutory intangibles acquired in business combinations, restructuring results results costs, disposal losses and exchange movements not hedge £m £m accounted; further details are included i
Slide 15: Cash Generation: Robust Delivery in Challenging Operating Environment
Cash Generation: Robust Delivery in Challenging Operating Environment Free cash flow1 £m 2024 Strong trade working capital performance in H2 in line with seasonality Adjusted operating profit1 540 of the Group. Full year movements greater than sales growth due to supply chain issues Depreciation and
Slide 16: 2025 Guidance
2025 Guidance Aerospace (pre-PLC costs) Engines: Revenue growth from stronger OE and parts repair. Operating profit guidance of £515-£545 million, including variable 2024 2025 consideration of £320-£360 million. Margins to exceed 32% at mid- £m results guidance1 point Revenue2 3,468 3,550-3,700 Oper
Slide 17: 2025 Guidance: Free Cash Flow
2025 Guidance: Free Cash Flow1 Growth in free cash flow1 driven by: Free cash flow 1 (after interest and tax) Increased RRSP cash flows £100+ million Operational improvements to businesses Reduced restructuring cash spend as transformational restructuring programme nears completion Outflow of c.£70
Slide 18: 5 Year Targets
Highlights 2024 Results and 2025 Guidance 5 Year Targets Full Year Results 18
Slide 19: Our Foundation for Growth
Our Foundation for Growth #1 Established positions on Engines RRSP aftermarket entitlement on 100% Independent aerostructures ~70% of the world’s high volume aircraft1 business with global reach and local presence2 of global flying hours Proprietary additive fabrication technology Partner >70% in de
Slide 20: Melrose Growth Strategy
Melrose Growth Strategy Deliver growth from Expand in targeted Participate in existing platforms new opportunities next generation aircraft • Production ramp-up • Engines additive fabrication • Next generation engines • Increasing returns from RRSPs • Advanced air mobility • Future single aisle • En
Slide 21: 5 Year Targets
5 Year Targets Revenue Operating Profit1 Free Cash Flow2 ~£5bn £1.2bn+ £600m HSD3 CAGR Margin up to 24%+ And growing beyond • Drop-through from incremental volume • Operational cash flow from growth and margin • ~90% of revenue from existing positions expansion • Ongoing operational efficiency and •
Slide 22: Key Drivers to £600m Free Cash Flow
Key Drivers to £600m Free Cash Flow Cash inflow Not drawn to scale Cash outflow 2025 2029 >17% CAGR for 2024 to 2029, driven by 1 Growing operating sources of cash production ramp-up on existing positions, Increasing growing aftermarket, operational improvements profit and expansion into new areas A
Slide 23: Disciplined Capital Allocation
Disciplined Capital Allocation • Investment in Engines’ unique additive fabrication technology Invest in Business • Growth in Structures: typically capital light and primarily customer funded • Capital expenditure to depreciation ratio in the range of 1-1.2x Maintain Strong • Leverage1 of 1.5-2x Bal
Slide 24: 5 Year Targets by Division
5 Year Targets by Division MELROSE Revenue: ~£5bn HSD2 Operating £1.2bn+ Profit1: 24%+ margin ENGINES STRUCTURES Revenue growth: HSD2 Revenue growth: MSD3 Operating Profit1 Mid to Operating Profit1 Margin %: Margin %: Low-teens high 30s Financial targets for the year ended 31 December 2029; growth m
Slide 25: Two Uniquely Positioned Businesses
Two Uniquely Positioned Businesses ENGINES STRUCTURES Portfolio breadth Revenue mix Portfolio breadth Revenue mix Civil RRSP Commercial Wing Electrical partnerships contracts Defence structures distribution Defence Civil Civil ~1/4 from defence ~1/3 from defence platforms1 platforms1 Government Othe
Slide 26: Engines Growth: Additive Fabrication Opportunity
Engines Growth: Additive Fabrication Opportunity Strategy Approach Target Certification Our additive fabrication technology focuses on engine cases & structures, representing a sizeable market opportunity Accelerating certification through our product expertise, ~£50m 20%+ operating profit IRR proce
Slide 27: Structures Growth: Capital Light Approach
Structures Growth: Capital Light Approach Government Funded Expansion Joint Venture with AVIC Customer-Funded Technology of F-35 Canopy Production to Expand in China Development for AAM1 Market Growing F-35 fleet that Leading Tier 1 in the AAM JV with AVIC to accelerate is using GKN’s canopies marke
Slide 28: Melrose Equity Case
Melrose Equity Case Business Attributes Shareholder Returns Well positioned in structurally growing civil and defence 5 Year Targets Long-term 1 aerospace markets HSD revenue growth Established presence on all of the world’s leading 2 aircraft and engines 24%+ margin Ongoing revenue and Unique portf
Slide 29: Appendices
Appendices Melrose
Slide 30: Reconciliation Between Statutory and Adjusted Results
Reconciliation Between Statutory and Adjusted1 Results Cash Continuing operations (spent)/received £m Total in 2024 1 Restructuring costs Income statement Cash spent in £m charge 2024 Statutory operating loss (4) Engines (15) (14) Amortisation of intangible assets acquired in business 255 - combinat
Slide 31: Net Debt
Net Debt1 2024 Reconciliation of net debt1 £m Net debt1 at 1 January 2024 (572) 2024 Additional liabilities analysis £m Free cash flow1 (74) Net debt1 (1,321) Amounts paid to shareholders including associated costs (503) Add: Melrose equity-settled compensation scheme related payments (198) - Lease
Slide 32: Some Helpful Data: 2024 and 2025
Some Helpful Data: 2024 and 2025 Income Statement 2024 2025 Guidance Cash Flow 2024 2025 Guidance Revenue: Depreciation: Owned assets £117 million £130 million Engines £1,459 million £1,600-1,650 million Leased assets £25 million £30 million Structures £2,009 million £1,950-2,050 million Total depre
Slide 33: Some Helpful Data: 2029
Some Helpful Data: 2029 Income Statement 2029 Targets1 Cash Flow 2029 Targets1 Revenue: Depreciation: Engines HSD2 CAGR3 Owned assets c.£135 million Leased assets c.£35 million Structures MSD2 CAGR3 Total depreciation c.£170 million Melrose Group c.£5 billion Variable consideration c.£500 million Ad
Slide 34: Historical Variable Consideration Table
Historical Variable Consideration Table £m 2018 2019 2020 2021 2022 2023 2024 Income Statement: RRSP Sales 415 679 354 402 547 680 859 Balance Sheet: Unbilled work done – brought forward 171 206 242 247 305 450 595 Add: variable consideration 28 60 26 44 105 136 207 Add: impact of risk assessment 24
Slide 35: Foreign Exchange Environment: Transactional Hedging Position
Foreign Exchange Environment: Transactional Hedging Position1 EUR:USD 2025 2026 2027 2028 2029 2030 Transaction FX exposures and approach (figures in USD) Exposure in $m 491 362 293 289 184 17 • Main currency pairs are EUR:USD and GBP:USD • Additional SEK and NOK hedged vs USD1 Hedged 93% 91% 85% 71
Slide 36: Overview of RRSP Portfolio
Overview of RRSP Portfolio Extract from RRSP booklet1 released in October 2024 Melrose has an enviable, well-diversified portfolio of 19 RRSPs at differing levels of maturity, covering all four major OEMs and with aftermarket exposure on both narrowbody and widebody engines RRSP EXPOSURE BY FLIGHT H