Melrose Mergers and Acquisitions Presentation Deck
Aerospace: highlights
Melrose
Market recovery well underway and GKN gaining momentum
Civil market anticipated to continue to improve throughout 2022; narrowbody ramping-up and winning opportunities in business jets
Engine OEMs facing supply chain challenges; however, GKN engine deliveries largely on track
Repositioning the business to focus on higher margin "design to build" positions and growth in attractive aftermarket and repair
Business improvement actions underway, accelerating restructuring
Operational improvements in quality and delivery - customer quality improved by 34% versus H1 2021¹ and further gains to come
Material and labour shortages, inflation and energy cost increases are being successfully offset; work underway to mitigate future risk
Footprint rationalisation on track - major projects in Nordics, Netherlands and US to be substantially complete by the end of 2023
Ongoing investments in technology to drive sustainable future of flight
Strong progress on core technology including additive manufacturing, fan blade repair, composites and Wing of Tomorrow design
Development work ongoing on next generation engines including CFM RISE and P&W GTF
Major contributor to next generation aircraft including electric, hydrogen and eVTOL platforms (e.g. Eviation Alice and Vertical)
Well positioned for sustained profit growth and excellent cash generation
Expecting growth² of ~7% blended CAGR to 2030, faster rebound to 2025 (>10% CAGR)
Clear path to 14%+ target operating margin on a full market recovery
Engines RRSPs and aftermarket set to generate good margins and very strong cash flows as flying hours increase; expected lifetime
cash inflow of c.£18.5 billion on 19 engine contracts (NPV3 of c.£5 billion)
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As measured by reported customer 'escapes'
Growth rates based on Cirium, Teal and US Congressional Budget Office applied to GKN portfolio
Using a foreign exchange rate of USD:GBP of 1.30:1 and calculated using the midpoint between a debt related discount rate of 5% (NPV c.£7 billion) and a GKN Aerospace
pretax weighted average cost of capital discount rate of 10% consistent with data in the Melrose Industries PLC 2021 Annual Report (NPV c.£3.5 billion)
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