GKN Aerospace owner Melrose to report £400m profit amid travel boom

GKN Aerospace owner Melrose Industries is expecting profits of around £400m in its full-year results next Thursday, as pent-up demand for travel bumps up aircraft orders.

Headquartered in London, the company specialises in acquiring and ramping up performance of manufacturing companies . Its booming aerospace business GKN supplies airframe and engine structures to the major planemakers Boeing and Airbus.

Shares have soared over 90 per cent in the past 12 months as the aviation sector benefitted from a boom in demand for holidays on the lifting of Covid-era lockdown restrictions.

Underlying revenues rose 18 per cent in the four months to 31 October. Full-year guidance for underlying operating profit was lifted by £25m to between £400 and £410m in November.

Alongside rising profits and revenue, the pure-play aerospace businesses’ order book has also increased to more than 12,000 parts, stretching to 2029.

“The group’s benefitting from sector-wide tailwinds like pent-up consumer demand for travel and a huge backlog of plane orders,” Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said.

The strong order book gives the group “great revenue visibility in the near term,” he explained, with investors “keen to see if this demand has kept up over the final months of 2023.”

Revenues are expected to come in at around £3.4bn, in line with the group’s prior guidance. Chiekrie added: “Improved margins in the Engines segment, which were sitting in excess of 25 per cent at the last count, mean profits will be in focus too.”

Last week, analysts at Citi lifted their target price for Melrose from 620p to 735p, citing its “very strong cash generation.”

In November, Melrose signed a £4bn deal with the aircraft engine supplier GE Aerospace, prompting shares to jump 4 per cent.