8. Melrose Plc
Flying High – Aerospace Parts for Profit
Melrose Plc is a UK-listed company that makes money by designing and manufacturing high-tech components for the aerospace industry, supplying parts for planes that fly worldwide. It operates in the aerospace sector – a high-stakes field where precision and reliability are everything – focusing on products for both civil and defence markets, from passenger jets to military aircraft.
The company has two main divisions: Engines and Structures. The Engines division produces specialised components like structural parts for aircraft engines, working with all major engine makers globally. It also offers repair services and aftermarket contracts, which means fixing parts and selling spares long after the original sale – a steady earner as planes need maintenance for decades. In 2024, this division saw a 26% revenue jump, with aftermarket sales up 32%, driven by growing demand for air travel. The Structures division makes airframe parts, including lightweight composite and metallic structures, plus electrical systems for planes. It supplies major manufacturers like Boeing and Airbus, benefiting from long-term contracts as airlines ramp up production.
Melrose’s income comes from selling these components to original equipment manufacturers (OEMs) – the big firms that build planes – and from aftermarket services. It’s a global business, with products on 100,000 flights daily, and it leans on its tech edge to stay competitive. In 2024, Melrose reported revenues of £3.47 billion, up 3.5% from the previous year, with operating profits soaring 42% to £540 million, thanks to strong engine sales. However, it faces challenges like supply chain snags and currency fluctuations, which shaved £10 million off profits last year. Based in London, Melrose employs around 14,000 people and has a market cap of £6.17 billion as of March 2025.
Melrose is betting on growth in air travel and defence spending – a tailwind as governments boost military budgets. It’s also pushing for sustainability, aiming for net zero, which could open doors to new contracts. Still, with ambitious targets like £5 billion in revenue by 2029, it’ll need to navigate a bumpy ride in a competitive market.
Melrose is, quite simply, not a particularly compelling investment. It operates in an industry where it sells to powerful buyers and offers products that could be manufactured by competitors. Its fortunes are ultimately tied to a highly cyclical sector – one that does appear to be entering a sustained upcycle, but still comes with inherent volatility.
The company does have some strengths. Its historic "buy, improve, sell" model ensures a strong focus on cost efficiency, and management has a track record of operational improvements. However, this is not the kind of business that generates transformational wealth for investors. The best thing that could (and probably will) happen is that it gets bought out one day.
While Melrose may offer steady returns for those willing to ride the cycle, Wonder Stocks focuses on companies with exceptional long-term potential. As such, it won’t be a candidate for further investigation.
