With customers playing catch up after Covid and new orders flying in, analysts think the aerospace trade is set for a prolonged boom.
Melrose, no longer an aggressive dealmaker, will focus entirely on its aerospace arm.
That means CEO Simon Peckham and CFO Geoffrey Martin will stand down next year, to be replaced by insiders Peter Dilnot and Matthew Gregory.
The company said: “Given Melrose has transitioned into a long-term aerospace group, the company believes that this is the right time to begin evolving the executive management team to progress the changed strategy.”
In the half-year Melrose saw revenue up 19% at £1.63 billion, while profits jumped from £9 million to £134 million.
It plans to buy back a large chunk of shares and will start in October, earlier than previously guided.
Peckham, after 20 years at Melrose, said: “There will be a big uplift in the aerospace cycle, there is a huge backlog of orders.”
Profit this year will be as high as £385 million with an expectation in the longer run to hit annual profits of £1 billion. That should take three years and puts it in line for a scrap with Rolls Royce, for whom it already makes some engine parts.
If it hits those profit goals, the business could be worth £10 billion. Today the shares jumped 39p to 548p, which values the company at £7.4 billion.
Peckham, 61, says he has no plans to retire and hopes there will be chance in the future to do “a Melrose 2” – buying up struggling firms, improving them and selling them on.
He thinks while the UK economy is headed for tough times, inflation and interest rates will come down faster than people think.
Melrose’s makeover follows its demerger of the GKN automotive business into a separate London quoted company now called Dowlais. Melrose will rename itself Melrose Aerospace in time, City watchers say.