Melrose PLC (MRO.LN) - Aerospace Investor Day Update
Higher Potential and £500M Share Repurchase Program
A few updates on Melrose are in order since my initial MRO pitch. Things are progressing above my expectations and management continues to underpromise and overdeliver (as they historically have):
On 6/3/22, MRO announced it would be selling Ergotron for ~$650 million (£520 million) with the transaction expected to close in Q3.
I assumed Ergotron would be sold this year in the £400-£700M range (£400 bear/£500 base/£700 bull), implying 7-12x EBITDA.
Management hosted their Aerospace Investor Day on 6/7/22 (link to presentation) with the following highlights:
An updated medium term operating margin target of 14%+ (vs. 12%+ prior) on a full market recovery
Expected revenue annual growth rate of 7% to 2030, with a faster rebound to 2025 of greater than 10%
Expected lifetime net cash inflow of £18.5 billion on 19 engine contracts with a NPV of £5B (vs. £3B NPV prior).
These contracts currently comprise only 5% of Melrose Group revenue.
Accelerated progress on restructuring, which will be substantially complete by the end of 2023
On the heels of its Aerospace Investor Day, MRO announced a £500M share repurchase program this morning.
Updated Operating Margin Target:
GKN Engines Cash Flow Outlook:
