By Leeham News Team

Mar 6, 2025, © Leeham News: Melrose Industries, the parent company of GKN Aerospace, has unveiled ambitious financial targets, setting its sights on approximately £5 billion ($6.4 billion) in revenue and £1.2 billion in adjusted operating profit by 2029 after achieving profit last year at the top end of expectations despite industry-wide supply chain issues.

In its latest, full-year earnings report released Thursday, the company reported a 42% year-over-year increase in adjusted operating profit for 2024, to £540 million.

The UK-based aerospace company’s revenue also saw an 11% boost, reaching £3.47 billion, led by the engines division and its “buoyant aftermarket.”

Speaking to analysts, CEO Peter Dilnot said there was “good momentum for 2025” despite a “difficult time for the industry with supply chain challenges.”

“We will see another step up in profit and margins [this year] and complete our extensive restructuring program,” he added.

Results overview for 2024. Credit: Melrose

Growth in 2025

Matthew Gregory, Melrose’s chief financial officer, told investors that in 2025, “substantial cash will be generated [with cash flow expected to top £100m], an important inflection point on our way to our long term targets.”

The company expects revenue of between £3.55-£3.7 billion this year, helped by stronger OE and parts repair. Forecasted adjusted operating profit for 2025 sits at £650-£690 billion.

Elsewhere, progress is being made towards resolving the outstanding financial drag of the GTF program issues, while China’s burgeoning civil aerospace market was becoming an “important play” for the business, Dilnot said.

On the issues relating to powder metal manufacturing on some variants of Pratt & Whitney’s GTF engine, the inspection program is continuing and Gregory said the total cash cost remained around £200m.

Melrose’s strong financial performance comes as aerospace manufacturers face rising costs, labor shortages, and delays in obtaining key components.

The aerospace sector has been recovering steadily from pandemic-era setbacks, with major industry players ramping up production to meet increasing demand for commercial and defense-related aircraft.

Five-year targets

Melrose remains optimistic about its growth trajectory, citing efficiency improvements and strong demand for its aerospace products as key drivers.

The bullish outlook aligns with broader industry trends, as companies look to capitalize on the resurgence in air travel and renewed government defense spending.

By 2029, Melrose aims to achieve around £5 billion in revenue with a high-single-digit CAGR, £1.2 billion+ in operating profit (24%+ margin), and £600 million in free cash flow.

Around 90% of revenue will come from existing positions, supported by OEM build rates and industry flying hours growth, the company said. Efficiency improvements and a strong aftermarket mix will help drive the expansion.

Defence build-up

In order to reach this goal, Melrose expects to ramp-up production, capitalize on the use of engines additive fabrication, and seek further involvement in future flight opportunities, including advanced air mobility – both in civil and defense applications.

Looking at the next decade, Melrose said it will be exploring next generation engines, future single aisle aircraft, sixth generation fighters and the prospect of hydrogen flight into the 2030s.

Dilnot said that the full weight of the increased defense spending expected in the coming months due to the uncertain geopolitical landscape had “arguably not” been accounted for in the Melrose figures, suggesting the company may see further improvements if promised investments are honored.

He said Melrose was well placed to benefit from this spending, on both sides of the Atlantic. “We have established positions on all the major platforms…such as the F35. That position is strong,” he said. “Look at the world around us…clearly defence spending is going one way.”