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Melrose on track amid 'unpredictable' end markets

By Josh White

Date: Tuesday 13 Nov 2018

Melrose on track amid 'unpredictable' end markets

(Sharecast News) - Melrose Industries updated the market on its trading for the four months from 1 July to 31 October on Monday, reporting that it remained in line with the board's expectations for the 2018 financial year.
The FTSE 100 firm said that in the period, it saw "strong" revenue growth in it aerospace and powder metallurgy operations, with flat revenue in automotive.

It said it was confident that the GKN businesses offered an "outstanding opportunity" for value creation over the medium term.

On a divisional basis, Melrose said aerospace was performing "well", with revenue up over 6% over last year and good progress made on margin, including improvements in the performance of North America.

With an "experienced and incentivised" management team, the board said the aerospace business was making the improvements necessary to achieve the acquisition objectives.

In powder metallurgy, the company achieved revenue growth in the period of 9% year-on-year, with improved margins.

That good momentum gave the board confidence that the 14% margin target could be achieved in the medium term, it explained.

In the automotive division, revenue was flat compared to last year despite some "well publicised" industry factors.

Consistent with previous reporting periods, margin was lower, but Melrose said it remained confident that operational improvements identified on acquisition were achievable and would positively impact performance in 2019 and beyond.

Liam Butterworth was appointed chief executive officer of the automotive division on 5 November.

Melrose said he was assembling a new management team from internal and external sources to "significantly enhance" the performance of the business.

The company said its Nortek Air & Security operation achieved "broadly flat" sales year-on-year in the period.

It explained that the effects of US tariffs in those businesses were materially confined to security and Ergotron in respect of their factories based in China, and thus tariff issues for the businesses should not have a material effect on the Melrose Group.

Net debt and cash generation remained in line with the board's expectations, Melrose reported.

"Melrose has a proven business model, which has been successful over many years and through several economic cycles," said chairman Christopher Miller.

"We are confident that there is an outstanding opportunity to make significant and lasting improvements to the performance of the GKN businesses."

Miller said that, while certain end markets could be unpredictable, the group remained on track to meet the board's expectations for the year.

"We are excited by the future prospects of the group and look forward to delivering significant value for shareholders."

Melrose said it would present its full year results on 7 March, and host a capital markets day in London on 3 April next year, focussed on the aerospace and automotive divisions.

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