Melrose to take £25m-£30m hit from incident at California facility

31st Jul 2026 10:10

(Sharecast News) - Melrose Industries warned on Friday that it expects to take a hit of between £25m and £30m in the second half after an incident at its Garden Grove facility in California.

As well as the exceptional costs relating to the incident, Melrose highlighted the financial impact from operating at reduced capacity. The engineer and owner of GKN Aerospace also said it has decided to pause the current £175m share buyback programme pending clarification of the impact of the incident.

In its results for the six months to the end of June, Melrose reported an 18% increase in pre-tax profit to £282m, on revenue of £1.9bn, up 10% on the same period a year earlier.

Operating profit grew 16% to £347m and the dividend per share was lifted 13% to 2.7p. Free cash flow improved by £67m, with an inflow of £13m versus an outflow of £54m a year earlier.

Melrose hailed "strong" revenue growth of 19% in the engines business, driven by both OE and aftermarket, while the airframes segment saw revenues grow 4%, driven by defence.

Chief executive Peter Dilnot said: "We delivered a good performance in the first half, building on the momentum from last year, with operating profit up 16% and a strong improvement in free cash flow. This was underpinned by good commercial and technology progress, combined with operational improvements through our Brilliant Basics lean operating model.

"We are managing the situation at our Garden Grove transparencies site following the incident in May. Partial production has since resumed, and we will continue to work closely with customers, regulators and other authorities to safely restore the site to full production in the second half.

"Our clear growth strategy is underpinned by attractive end markets, differentiated technology and established positions on the world's leading civil and defence aircraft. We have positive momentum and are confident about delivering sustained increases in profit and cash flow in the years ahead."

At 1010 BST, the shares were down 2.1% at 465.41p.

See latest RNS on Investegate