UK's Melrose shares jump on profit beat, slowing cash burn
While geopolitical tensions are fuelling defence spending and growth for aerospace suppliers, U.S. President Donald Trump's sweeping tariffs are forcing companies like Melrose to reassess their supply chains and negotiate pricing.
CEO Peter Dilnot told Reuters he was pleased with Washington's trade agreement with the UK and provisional deal with the European Union as aerospace parts exemptions would avoid potential threats to jet production and boost suppliers as well.
"This is really good news for the industry. It means that you know flows of material can go, it creates an easier operating environment in the second-half," Dilnot said.
Melrose said it was working with agencies across the UK, EU, and United States on new sovereign defence programmes, adding that it had largely mitigated the impact of tariffs through supply-chain adjustments and negotiations with customers and suppliers.
It reported 310 million pounds ($407.5 million) in adjusted operating profit for the first half of the year, topping analysts' estimate of 299 million pounds in a company-compiled poll.
That, along with lower restructuring costs, helped reduce cash outflow to 54 million pounds from 145 million pounds a year earlier.
Melrose shares were up 6.8% at 546.8 pence by 1001 GMT, the biggest gainer on the FTSE 100 (.FTSE), opens new tab index.
The company maintained its 2025 forecasts for revenue and profit on a constant currency basis, with free cash flow of more than 100 million pounds for the year, reaching 600 million pounds by 2029.
"We see positives in the better-than-expected cash and the nice programmatic wins across both Engines/Structures," analysts at RBC Capital Markets said, referring to Melrose's business units.
($1 = 0.7607 pounds)
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One of the main reasons that people in the wine business do not believe the tariffs will benefit domestic producers, as the White House is promising, is that they have seen this scenario play out before, during Trump's first term as president. In 2019, the administration imposed a 25% tariff on most European wines, among other products, in retaliation for European subsidies on Airbus passenger jets. Trump said at the time that the relatively low price of French wines was unfair to California producers, but no evidence emerged that the tariff did anything to redress that perceived unfairness. 'It did not increase my domestic wine sales at all,' Knight said.
