Melrose Industries increased first-half revenue by 10% to £1.873bn as stronger aerospace demand, aftermarket activity, and operating improvements outweighed disruption at its Garden Grove airframes facility in California.
Adjusted operating profit rose by 16% to £347m for the six months ended 30 June 2026, while the adjusted operating margin increased by 50 basis points to 18.5%. Free cash flow moved to a £13m inflow from a £54m outflow a year earlier, although net debt increased from £1.407bn at the end of 2025 to £1.53bn after dividends, share buybacks, foreign exchange movements, and other items.
Engines delivered the strongest divisional performance, with revenue up 19% to £896m and adjusted operating profit rising 21% to £303m. Original equipment revenue increased by 23%, while aftermarket revenue grew by 15%, reflecting higher production rates, repair demand, and Melrose’s participation in risk-and-revenue-sharing partnerships across major civil engine programmes.
Growth came despite continuing constraints in forgings, castings, and rare-earth metal powders used in parts of the engine repair operation. Aircraft manufacturers are trying to lift output against large order backlogs, pushing the pressure into suppliers that must expand rate capability while preserving traceability, process control, and certified quality. Melrose is investing in original equipment capacity, repair growth, and additive fabrication as it prepares for higher civil and defence volumes.
Airframes revenue increased by 4% to £977m, supported by 14% growth in defence activity, while civil revenue declined by 1%. Adjusted operating profit fell by 1% to £62m and the margin reduced to 6.3%, largely because of the incident at Garden Grove at the end of May. The site, which produces aircraft transparencies, has resumed partial production and is expected to operate at around half of normal capacity until the full restart is completed.
Melrose said the interruption reduced first-half revenue by £16m and adjusted operating profit by £9m. The company expects the site’s reduced output to lower monthly revenue, operating profit, and cash by around £6m while recovery continues, with additional exceptional costs of £25m to £30m currently anticipated in the second half.
The group has paused its £175m share buyback programme pending greater clarity over the financial, regulatory, and legal consequences of the incident. It had completed £70m of buybacks during 2026 by the end of June, including £12m under the current programme. Garden Grove is therefore affecting capital allocation as well as output, rather than remaining a contained factory interruption.
Elsewhere, Melrose reported measurable gains from its Brilliant Basics operating model. Days inventory outstanding fell by 5% compared with June 2025, and the group said its total incident rate for the preceding 12 months was 25% lower than in the comparable period. At the Tallassee composites site, a joint improvement programme with GE introduced revised visual work instructions and 3D inspection technology, reducing inspection time by 90% and creating a route to increase GEnx fan-case output from five to ten units per week.
Aerospace production is increasingly limited by the rate at which complex components can pass through inspection, repair, and qualified manufacturing processes. Doubling nominal machine capacity achieves little when inspection becomes the bottleneck, inventory remains trapped between operations, or specialist materials cannot be secured. Melrose’s daily management, structured problem solving, and targeted improvement projects are intended to release capacity without relying solely on new floorspace and equipment.
In the UK, the group is continuing to improve machining and inspection capability at Filton to support increased build rates. It is also investing in automation and capacity across Airframes, with customer funding supporting parts of the defence expansion. Customer backed investment and internal productivity work reduce some of the cash burden created by the aerospace ramp, although Garden Grove shows how quickly one constrained site can cut across wider progress.
Excluding the incident’s effect, Melrose left its full-year guidance unchanged. It expects 2026 revenue of £3.75bn to £3.95bn, adjusted operating profit of £700m to £750m, and free cash flow of £150m to £200m. Its medium-term plan targets £600m of free cash flow in 2029, supported by production increases, aftermarket growth, operational improvement, and changes in the cash profile of its engine partnerships.
The immediate test is restoring Garden Grove safely while the rest of the group raises output across a supply chain already short of forgings, castings, powders, and qualified capacity. First-half demand was strong enough to absorb the disruption. The second half will show how much of that demand Melrose can convert without allowing recovery costs and constrained operations to consume the benefit.
