- Operating Profit Growth Operating profit surged 23% to GBP 647 million in 2025, driven by Engines and Defense divisions.
- Free Cash Flow Inflection Achieved positive free cash flow of GBP 125 million in 2025, exceeding guidance and signaling progress toward GBP 600 million target by 2029.
- 2026 Revenue Guidance Revenue expected to grow 10% year-on-year, reaching GBP 3.75–3.95 billion, with operating profit projected at GBP 700–750 million (19% margins).
- Share Buyback Program Announced a GBP 175 million share buyback for 2026, reflecting confidence in hitting 2029 free cash flow targets and returning capital to shareholders.
Revenue and Margin Performance
The Engines division's revenue growth was driven by higher GEnx and GTF volumes, and the aftermarket grew 14%. Airframes delivered 3% like-for-like revenue growth, driven by defense, which was up 15%. The company's guidance for 2026 indicates revenue growth of around 10%, with operating profit expected to be between GBP 700 million and GBP 750 million, representing margins around 19%.
Cash Flow and Capital Allocation
Melrose's cash performance in 2025 was strong, with free cash flow post interest and tax exceeding guidance. The company is guiding to free cash flow post interest and tax of GBP 150 million to GBP 200 million in 2026. The company's capital allocation policy prioritizes investing in the business, maintaining disciplined leverage, and returning cash to shareholders through a new GBP 175 million 12-month share buyback program.
Valuation and Outlook
Using the given valuation metrics, Melrose's P/E Ratio of 18.9 and EV/EBITDA of 7.16 suggest that the market is pricing in a certain level of growth. With a ROE of 13.03% and ROIC of 11.75%, the company is generating returns above its cost of capital. Analysts estimate revenue growth at 9.5% for next year, which is slightly below the company's guidance. As Matthew Gregory mentioned, "We're confident in delivering the midpoint of our free cash flow range of GBP 175 million, with potential for upside."
Growth Drivers and Opportunities
Melrose's growth drivers include production ramp-ups, RSPs, engine repairs, and operational excellence. The company is also expanding in additive fabrication, military uncrewed vehicles, and advanced air mobility, with a focus on sustainability, safety, and people engagement. With a strong backlog and increasing shop visits due to rising flying hours, Melrose is well-positioned to deliver growth from existing platforms.