Melrose trading update: guidance held as revenue rises 14% in July–October
Melrose Industries has kept its full year guidance intact after a strong four months to 31 October 2025. Group revenue rose 14% at constant currency, with Engines up 28% and Structures up 5%, and adjusted operating profit was “significantly higher” than the same period last year and in line with expectations.
The CEO’s tone was confident: civil and defence are both pushing ahead, production is ramping, and the Group says it is positioned on “all the world’s leading aircraft”. For investors, this update reads as steady execution in the most important trading stretch of the year, rather than a profit warning or a guidance hike – solid and reassuring.
Note: growth rates are at constant currency and exclude exited businesses. The comparator period in 2024 included £4 million of sales from exited businesses.
Key FY2025 guidance and sensitivities
| Metric | Guidance / Update |
|---|---|
| Revenue | £3.425 billion to £3.575 billion |
| Adjusted operating profit | £620 million to £650 million (post PLC costs of £30 million) |
| Free cash flow | £100+ million (after interest and tax) |
| FX planning rate | US$ = 1.335 average exchange rate |
| FX sensitivity | 1% move in USD or Euro changes adjusted operating profit by £6 million and £0.5 million respectively; gross debt by £11 million and £3 million respectively |
Definitions in brief: OE means original equipment (new parts delivered to aircraft makers). The aftermarket covers spares and maintenance. RRSP refers to risk-and-revenue-sharing partnerships on engine programmes. “Constant currency” strips out foreign exchange swings to show underlying growth.
Engines division: OE surge and a healthy aftermarket
Engines was the star performer. Revenue rose 28%, with OE up 35% across both narrowbody and widebody platforms, supported by Melrose’s RRSP portfolio. The aftermarket grew 22%, and notably, the parts repair business returned to “robust” growth.
Two points matter here. First, a 35% OE rise shows Melrose is participating meaningfully in the industry-wide production ramp. Second, the aftermarket acceleration – helped by a recovery from tariff-related uncertainty and earlier backlogs – typically carries attractive margins and tends to be more resilient through cycles. That mix is supportive for profits, though the RNS doesn’t disclose divisional margins.
Management also flags readiness for “the next generation of engines”. That is strategic positioning language, but in plain English: they expect to keep winning work as newer technologies roll through the fleet.
Structures division: steady progress with defence tailwinds
Structures delivered 5% revenue growth, a touch better than the half-year pace. Defence was the driver, helped by stronger demand, business improvement actions, and “sustainable pricing”. Civil remained constrained by customer supply chain issues – a widely reported bottleneck across the aerospace ecosystem.
The read-across: defence offers support and pricing discipline is holding, but civil faces timing and logistics friction outside Melrose’s direct control. As OEM build rates rise to meet record backlogs, Structures should have a clearer runway – but patience is still required.
End-market backdrop: record civil backlogs and a defence step-change
Civil aerospace remains underpinned by record order books, ongoing air traffic growth, and low aircraft retirement rates. That cocktail supports both OE and aftermarket demand. Crucially, the UK/US and EU/US tariff agreements have been “welcomed” and give the sector more certainty – positive after several years of sporadic tariff noise.
On defence, geopolitical uncertainty is driving a step change in spending. Melrose is seeing “a number of new growth opportunities” as a result. Diversification into defence is helpful: it can smooth civil cyclicality and support margins, although the RNS does not quantify exposure by end-market.
Why the guidance confirmation matters
- Execution in peak trading: Management calls this the industry’s most significant trading period. Delivering momentum now reduces the risk of late-year surprises.
- Engines strength is broad-based: Narrowbody and widebody OE up, and aftermarket up, suggest no single-programme dependence driving the numbers.
- Cash generation turning the corner: £100+ million of free cash flow (after interest and tax) is modest in absolute terms versus group size, but positive and pointed upwards as production and aftermarket activity build.
- P/L leverage to FX is material: A 1% USD move shifts adjusted operating profit by £6 million, and gross debt by £11 million. With guidance anchored to US$ = 1.335, FX remains a watch item into results.
In short, this is a clean “on track” update. No change to guidance can frustrate those hunting for a beat, but for holders it underlines a simple message: the plan is working.
What could go wrong from here?
- Supply chain constraints: Civil Structures is still feeling customer supply chain issues. If constraints linger, some revenue may slip rightward.
- Tariff and policy risk: Guidance excludes the direct and indirect impact of new or changed tariffs. Recent agreements help, but policy can move quickly.
- FX volatility: Sensitivities are clear and meaningful. A stronger or weaker dollar can swing profit and reported debt.
- Ramp-up execution: Engines OE is growing fast. Ramps can strain working capital and operations if bottlenecks appear.
How I’m reading the momentum by division
Engines: positive skew
With OE up 35% and aftermarket up 22%, Engines is doing the heavy lifting. The return of growth in parts repair is a nice kicker. The commentary implies confidence into 2026 as next-gen engines roll in.
Structures: improving, but dependent on OEM cadence
Defence is pulling its weight and pricing discipline helps. The civil drag is external. If OEM build rates keep stepping up to attack record backlogs, Structures could see a cleaner acceleration.
Numbers and dates investors should note
- Period covered: 1 July 2025 to 31 October 2025.
- Group revenue growth: 14% (constant currency, excluding exited businesses).
- Engines: +28% revenue; OE +35%; aftermarket +22%.
- Structures: +5% revenue.
- Adjusted operating profit: significantly higher year-on-year, in line with expectations (not disclosed in pounds for the period).
- FY2025 results date: Friday 27 February 2026.
Bottom line: solid delivery, guidance intact, eyes on cash and ramps
Melrose has put up double-digit revenue growth, Engines is humming, and Structures is edging forward despite civil supply chain noise. Guidance is unchanged: £3.425 billion to £3.575 billion of revenue, £620 million to £650 million of adjusted operating profit (post £30 million PLC costs), and £100+ million of free cash flow after interest and tax.
It is not a fireworks update, but it is the kind of steady confirmation that builds confidence. Into results, watch free cash flow conversion, the pace of the OE ramp, and any colour on defence opportunity capture. For now, the trajectory is positive.
