Melrose confident it can weather GTF engine fleet issues

Melrose Industries offered clarification on Tuesday, over a recent update from RTX on the Pratt & Whitney GTF fleet.

The update pertained to a previously-identified unusual condition in the powder metal used in the manufacturing of specific engine parts.

Its subsidiary GKN Aerospace has a 4% stake in the GTF PW1100G variant affected by the issue.

Melrose said information from RTX suggested that the maximum potential cash implication for Melrose, stretching until 2026, could hover around the ballpark of £200m, predicated on the assumption that all the costs were tied to the programme.

The company said its financial projections for all its RRSP programmes were rooted in caution, explaining that a significant portion of its endeavours was focussed on the delivery of GKN components, which usually have a lifespan equivalent to that of the engine.

Additionally, the company accounted for potential risks that could emerge over the entirety of the programme's duration.

As a result, Melrose confirmed that there would be no revisions to its profit and balance sheet forecasts.

Additionally, the share buyback programme announced a week ago, set to start in October, would go ahead as scheduled.

Melrose said its aerospace engines enterprise was projected to achieve over 30% in operating margins after 2025, including contributions from an expansive array of 19 RRSP engines contracts.

“RTX indicated to us and the market yesterday that the GTF rare parts issue is within the scope they outlined previously and the cash impact is now assumed to be spread over a longer-term,” said Melrose chief executive officer Simon Peckham.

“We confirm our confidence in achieving the previous profit and balance sheet guidance and look forward to commencing our share buyback programme in October.”

At 0830 BST, shares in Melrose Industries were up 1.42% at 492.4p.

Reporting by Josh White for Sharecast.com.