Melrose Industries PLC Capital Markets Event & New 2025 Guidance (7358Z)
17 Mai 2023 - 2:00PM
UK Regulatory
TIDMMRO
RNS Number : 7358Z
Melrose Industries PLC
17 May 2023
17 May 2023
MELROSE INDUSTRIES PLC
Capital Markets Event & New 2025 Guidance
Ahead of today's Capital Markets Event starting at 2.15pm in
London, Melrose Industries PLC ("Melrose") publishes the following
statement. All numbers are calculated at constant currency and
exclude the businesses recently demerged to Dowlais Group PLC.
Material new information
Material new information is announced today and will be
discussed at the Capital Markets Event. A presentation will be
available on the Melrose website before the event starts and a
recording of the event will be available on the Melrose website
after the event has concluded.
Trading expectations for 2023 were announced last week, on 10
May, along with a statement that the 14%+ Aerospace adjusted(1)
operating margin target is expected to be reached on a run rate
basis during 2024. Today, new guidance for 2025 is given which
materially exceeds previous adjusted(1) operating margin
expectations.
In addition, for the first time Aerospace is reported as two
divisions, Engines and Structures. The expected 2025 adjusted(1)
operating margin for Engines is 28% and Structures 9%, thus
increasing the blended expected Aerospace adjusted(1) operating
margin from 14%+ previously, to between 17% and 18%.
For ease of presentation in the following tables, the 2023
guidance is assumed to be in the middle of the expected ranges
announced by Melrose on 10 May 2023.
Aerospace 2023 and new 2025 guidance (prior to PLC costs(2)
)
Assumes GBP1 = $1.25
Total Aerospace(3) 2023(4) 2025
Revenue GBP3.4bn(5) GBP4.0bn
------------- ------------
Operating profit GBP350m GBP700m
------------- ------------
Operating margin 10% to 11% 17% to 18%
------------- ------------
EBITDA GBP505m GBP870m
------------- ------------
EBITDA margin 15% 22%
------------- ------------
Engines(3) 2023 2025
Revenue GBP1.3bn GBP1.8bn
---------- ----------
Operating profit GBP290m GBP500m
---------- ----------
Operating margin 22% 28%
---------- ----------
EBITDA GBP350m GBP580m
---------- ----------
EBITDA margin 27% 32%
---------- ----------
Structures(3) 2023 2025
Revenue GBP2.1bn(5) GBP2.2bn
------------- ----------
Operating profit GBP60m GBP200m
------------- ----------
Operating margin 3% 9%
------------- ----------
EBITDA GBP155m GBP290m
------------- ----------
EBITDA margin 7% 13%
------------- ----------
The Capital Markets Event today will lay out clearly why
Aerospace is on track to achieve this higher performance and that
further growth is expected beyond 2025.
The Aerospace profits are increasingly coming from Engines with
over 85% of this being from aftermarket activities by 2025.
In addition, lifetime net cash inflows, from RRSP engines
contracts, being approximately half the Engines business today, are
expected to total GBP20 billion with a net present value of GBP5.5
billion(6) .
Free cash flow margin(7) is expected to reach 12% in 2025 and
long-term 15% rising to greater than 20%.
This gives Melrose the capacity from 2024 onwards, after the
completion of current restructuring programmes, to buy back between
5% and 10% of its market capitalisation per annum in addition to
paying a progressive annual dividend, whilst maintaining a prudent
Balance Sheet.
Simon Peckham, Chief Executive of Melrose Industries PLC,
said:
"We are making clear today that after 5 years hard work,
Aerospace is now positioned to fulfil the potential it had at
acquisition, with a highly enviable aftermarket presence and
predictable strong cashflows. This is a great business in a very
attractive global aerospace sector and is being deliberately
focused to produce both top level equity performance and very
significant cash returns. We are totally focused on completing,
over the next 12 months, the work we need to do to maximise returns
for shareholders."
1. Described in the glossary to the Melrose Industries PLC
Annual Report and considered by the Board to be a key measure of
performance
2. PLC costs reducing to c.GBP30 million in 2023 and to c.GBP25 million in 2025
3. Unless otherwise stated, metrics refer to adjusted(1) measures
4. Consistent with guidance given in the 10 May 2023 trading update
5. Including c.GBP150 million of Structures revenue from planned
site closures to be exited in 2024
6. Using a discount rate of 7.5%, which is between a debt
related discount rate and a GKN Aerospace pre-tax weighted average
cost of capital
7. Unlevered and pre-tax
-ends-
Enquiries:
Montfort Communications: +44 (0) 20 3514 0897
Nick Miles +44 (0) 7739 701634 / Charlotte McMullen +44 (0) 7921
881800
miles@montfort.london / mcmullen@montfort.london
Investor Relations: Chris Dyett +44 (0) 7974 974690
ir@melroseplc.net
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END
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