(Reuters) -Melrose Industries, owner of aerospace parts maker GKN Aerospace, said on Monday it expects to deliver substantial free cash flow in 2025, thanks to its restructuring as well as cash generation from its Risk and Revenue Sharing Partnerships and the resolution of an issue with some engine parts.
Melrose shares rose as much as 9% as it also reported a 7% rise in revenue for the four months ended Oct. 31, helped by strength in its aftermarket business.
Prolonged production delays at crisis-stricken Boeing have hurt the pace of commercial jet production sector-wide, burdening an already strained supply chain.
The delays have also pushed airlines to extend the usage of older planes, boosting demand for aftermarket services and parts, a business that Melrose considers its most profitable one.
Melrose shares, which have fallen about 7% this year, have had some respite after the group clarified certain aspects of its Risk and Revenue Sharing Partnerships (RRSPs) in a document last month, prompting confidence among investors about its future cash flow.
“Looking further ahead, there are some tailwinds blowing in its favour. Contract repricing and new commercial agreements mean there’s room for growth to really step up in the near-to-medium term,” Hargreaves Lansdown analyst Aarin Chiekrie said.
Shares in Melrose were up 8.3% at 530 pence by 1001 GMT, at the top of London’s benchmark index.
Stifel analysts said combined with the strong momentum at the group’s engines aftermarket, the cash flow outlook should continue to offer reassurance which started with the publication of the RRSP booklet.
Melrose, which spun off its auto and other businesses last year to become a pure-play aerospace supplier, kept its full-year expectations unchanged, with adjusted operating profit at 550 million pounds to 570 million pounds ($694.76 million-$720.02 million).
The company said its adjusted operating profit continued to grow year-on-year in the four-month period, in line with its expectations.
($1 = 0.7916 pounds)
(Reporting by Yamini Kalia and Yadarisa Shabong in Bengaluru; Editing by Subhranshu Sahu and Susan Fenton)