Melrose Industries (LSE:MRO), the aerospace and defence engineering group, reported revenue of £1.873 billion for the six months to 30 June, up 10% on the prior-year period.
Adjusted operating profit rose 16% to £347 million, with margins up 50 basis points to 18.5%, driven by 19% revenue growth in the Engines division from both original equipment and aftermarket demand.
Free cash flow swung to a £13 million inflow, an improvement of £67 million, while net debt stood at £1.530 billion, representing leverage of 1.8 times, unchanged from December.
Adjusted diluted earnings per share climbed 22% to 17.7p, though statutory operating profit fell to £154 million from £441 million, hit by unrealised losses on foreign exchange derivatives.
A thermal incident involving a chemical tank at the Garden Grove transparencies facility in the US in late May cut first-half revenue by £16 million and adjusted operating profit by £9 million, with £13 million of exceptional response costs incurred and a further £25 million to £30 million expected in the second half.
The site, which generated £136 million in revenue in 2025 and supplies acrylic for platforms including the F-35, is running at around half capacity, and Melrose has paused its £175 million share buyback pending clarity on the incident's financial and legal impact.
"We are managing the situation at our Garden Grove transparencies site following the incident in May," said chief executive Peter Dilnot, adding that partial production has resumed and the company aims to restore full output in the second half.
The interim dividend rises 13% to 2.7p per share, and excluding the Garden Grove impact, full-year guidance is unchanged: revenue of £3.750 billion to £3.950 billion and adjusted operating profit of £700 million to £750 million.
News Intelligence what this means for the company
Melrose grew first-half operating profit 16% to £347m and raised its interim dividend 13% to 2.7p, but a chemical tank incident at its Garden Grove transparencies facility in May has cut revenue by £16m and operating profit by £9m in H1, with a further £25–30m in costs expected in H2. The site, which generated £136m revenue in 2025 and supplies acrylic for the F-35, is running at half capacity; management has paused the £175m share buyback pending clarity on financial and legal fallout, though it reaffirms full-year guidance excluding the incident's impact.
The profit beat and dividend raise reflect underlying operational momentum—Engines division revenue up 19%—but the Garden Grove incident introduces material near-term uncertainty. At £25–30m in expected H2 costs against a £700–750m full-year adjusted operating profit guidance, the incident represents 3–4% of the profit range; the pause on the £175m buyback (roughly 11% of net debt) signals management caution on balance-sheet deployment until the incident's scope is clearer.
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