(Reuters) -GKN Aerospace owner Melrose Industries on Friday beat expectations for first-half profit and posted a significantly lower cash outflow, sending its shares as much as 8% higher.
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 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)
(Reporting by Raechel Thankam Job in Bengaluru; Editing by Subhranshu Sahu, Kirsten Donovan)
