Last close As at 05/08/2026
GBP4.65
▲ −5.50 (−1.17%)
Market capitalisation
GBP5,792m
Research: Industrials
The crystallisation of the employee plan highlights the value created through the GKN acquisition, benefiting from the strong performance from the restructuring programme and current positive trends in the aerospace sector. The impact of the scheme on our forecasts will be limited, having already assumed the full value the scheme would accrue. There are no changes to our valuation of 654p per share as set out in our previous note.
Melrose Industries |
Crystallisation of the 2020 Employee Share Plan |
LTIP maturity |
Aerospace and defence |
3 June 2024 |
Share price performance
Business description
Next events
Analysts
Melrose Industries is a research client of Edison Investment Research Limited |
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The crystallisation of the employee plan highlights the value created through the GKN acquisition, benefiting from the strong performance from the restructuring programme and current positive trends in the aerospace sector. The impact of the scheme on our forecasts will be limited, having already assumed the full value the scheme would accrue. There are no changes to our valuation of 654p per share as set out in our previous note.
Year end |
Revenue (£m) |
PBT* (£m) |
EPS* |
DPS |
P/E |
Yield |
12/22 |
2,954 |
89 |
4.1 |
2.3 |
151.5 |
0.4 |
12/23 |
3,350 |
331 |
19.5 |
5.0 |
31.8 |
0.8 |
12/24e |
3,677 |
452 |
26.8 |
6.7 |
23.2 |
1.1 |
12/25e |
4,028 |
566 |
34.5 |
9.3 |
18.0 |
1.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Scheme achieves full payout
The 2020 long-term incentive plan (LTIP) matured on 31 May. The scheme provided for 7.5% of the value created, adjusted for cost of capital, to be ascribed to executive and senior management. The scheme has attained the full payout to the limit put in place.
Payout in cash rather than shares
The payout is due in shares, with 28.8m shares transferred to the recipients. However, the tax and PAYE liabilities are to be settled by the company in cash rather than issuing shares and selling on the market (to then be bought back through the current £500m repurchase scheme). This will reduce the number of shares issued by 29.2m. The initial cash cost will be £158.1m, with smaller elements over the following two years to reflect deferred shares to Peter Dilnot, CEO, as part of the potential clawback set out in the scheme.
Valuation: Minimal impact on forecasts
The impact of the scheme on our forecasts will be limited, having already assumed the full value the scheme would accrue. The decision to use the company cash will reduce the level of dilution. Share dilution will be c 2% lower than our expectations although the additional debt will carry finance costs, reducing our forecast PBT by 1.5%. We estimate an overall benefit of c 0.5% to EPS for the full year (ie FY25). Our net debt figure increases by £158m, still well within facilities, assisted by the strong cash generation of the group. Our new forecasts are: FY24 PBT of £452m from £456m (-0.8%) and EPS of 26.8p from 26.7p (+0.2%); and FY25 PBT of £566m from £575m (-1.6%) and EPS of 34.5p from 34.3p (+0.6%). Our net debt forecast increases from £1.1bn to £1.3bn in FY24. There are no changes to our valuation set out in our previous note.
Exhibit 1: Financial summary
£m |
2022 |
2023 |
2024e |
2025e |
|
Year to December |
IFRS |
IFRS |
IFRS |
IFRS |
|
INCOME STATEMENT |
|||||
Revenue |
|
2,954 |
3,350 |
3,677 |
4,028 |
EBITDA |
|
292 |
532 |
699 |
839 |
Operating profit (before amort. and excepts.) |
147 |
390 |
537 |
669 |
|
Amortisation of acquired intangibles |
(260) |
(260) |
(260) |
(260) |
|
Exceptionals |
(157) |
(73) |
(50) |
(10) |
|
Reported operating profit |
(270) |
57 |
227 |
399 |
|
Net Interest |
(58) |
(59) |
(84) |
(103) |
|
Exceptionals |
0 |
(6) |
|||
Profit Before Tax (norm) |
|
89 |
331 |
452 |
566 |
Profit Before Tax (reported) |
|
(328) |
(8) |
142 |
296 |
Reported tax |
99 |
9 |
(28) |
(59) |
|
Profit After Tax (norm) |
69 |
268 |
357 |
447 |
|
Profit After Tax (reported) |
(229) |
1 |
114 |
237 |
|
Minority interests |
(5) |
0 |
0 |
0 |
|
Discontinued operations |
(80) |
(1,020) |
0 |
0 |
|
Net income (normalised) |
64 |
268 |
357 |
447 |
|
Net income (reported) |
(314) |
(1,019) |
114 |
237 |
|
Average Number of Shares Outstanding (m) |
1,406 |
1,349 |
1,335 |
1,296 |
|
EPS - normalised (p) |
|
4.1 |
19.5 |
26.8 |
34.5 |
EPS - normalised fully diluted (p) |
|
4.1 |
19.1 |
26.8 |
34.4 |
EPS - basic reported (p) |
|
(16.6) |
(75.5) |
8.5 |
18.3 |
Dividend (p) |
2.3 |
5.0 |
6.7 |
9.3 |
|
Revenue growth (%) |
8.5 |
16.6 |
15.6 |
11.4 |
|
Gross Margin (%) |
14.3 |
35.0 |
36.0 |
37.0 |
|
EBITDA Margin (%) |
9.9 |
15.9 |
19.0 |
20.8 |
|
Normalised Operating Margin |
5.0 |
11.6 |
14.6 |
16.6 |
|
BALANCE SHEET |
|||||
Fixed Assets |
11,114 |
5,611 |
5,400 |
5,191 |
|
Intangible Assets |
6,882 |
3,397 |
3,137 |
2,877 |
|
Tangible Assets |
2,599 |
777 |
826 |
877 |
|
Investments & other |
1,633 |
1,437 |
1,437 |
1,437 |
|
Current Assets |
2,873 |
1,318 |
1,414 |
1,489 |
|
Stocks |
1,025 |
510 |
550 |
581 |
|
Debtors |
1,426 |
713 |
769 |
813 |
|
Cash & cash equivalents |
355 |
58 |
58 |
58 |
|
Other |
67 |
37 |
37 |
37 |
|
Current Liabilities |
2,978 |
1,533 |
1,653 |
1,706 |
|
Creditors |
2,347 |
1,179 |
1,271 |
1,344 |
|
Tax and social security |
141 |
20 |
20 |
20 |
|
Short term borrowings |
63 |
54 |
54 |
54 |
|
Other |
427 |
280 |
308 |
288 |
|
Long Term Liabilities |
3,841 |
1,829 |
1,479 |
1,056 |
|
Long term borrowings |
1,433 |
576 |
1,286 |
1,180 |
|
Other long term liabilities |
2,408 |
1,253 |
193 |
(124) |
|
Net Assets |
7,168 |
3,567 |
3,681 |
3,918 |
|
Minority interests |
39 |
0 |
0 |
0 |
|
Shareholders' equity |
7,129 |
3,567 |
3,681 |
3,918 |
|
CASH FLOW |
|||||
Operating Cash Flow |
292 |
532 |
699 |
839 |
|
Working capital |
(148) |
(146) |
(98) |
(88) |
|
Exceptional & other |
(83) |
(159) |
(305) |
(135) |
|
Tax |
(8) |
17 |
(85) |
(107) |
|
Net operating cash flow |
53 |
244 |
210 |
510 |
|
Capex |
(31) |
(93) |
(211) |
(221) |
|
Acquisitions/disposals |
(7) |
0 |
0 |
0 |
|
Net interest |
(82) |
(65) |
(70) |
(84) |
|
Equity financing |
0 |
(93) |
(565) |
0 |
|
Dividends |
(77) |
(81) |
(74) |
(98) |
|
Other |
|||||
Net Cash Flow |
(144) |
(88) |
(710) |
106 |
|
Opening net debt/(cash) |
343 |
487 |
572 |
1,282 |
|
Closing net debt/(cash) |
487 |
572 |
1,282 |
1,176 |
|
Source: Edison Investment Research
|
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