News that turnaround specialist Melrose Industries (MRO) is looking to make its next acquisition in "due course" was not enough to arrest a slump in the shares. Neither was a hike in the dividend, which shareholders will receive alongside £200m from the sale of industrial cable maker Bridon.
Instead, investors seem to have focused their attention on the downfall of Brush, which makes electricity-generation equipment. The business suffered weaker order intake, resulting in lower sales and a 7 per cent slide in adjusted operating profits at constant currencies. Management does not expect a short-term turnaround, and warned of a significant fall in profits this year.
Elster, on the other hand, is in much better health. Restructuring activity continued to boost adjusted operating profits across its gas, electricity and water markets, and drove a 220 basis-point increase in the adjusted operating margin to 19.6 per cent. Strip out currency shifts and sales rose 6 per cent in its core gas operations, thanks to a strong order book, the acquisition of Eclipse in October and the manufacture of 5m gas meters. In fact, demand for conventional gas meters is so buoyant that management expects it to offset the impact of the weak oil price.
Broker JPMorgan Cazenove has nonetheless slashed its adjusted EPS forecast by 5 per cent to 16.1p (from 15.3p in 2014).
| MELROSE INDUSTRIES (MRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 286p | MARKET VALUE: | £2.8bn | |
| TOUCH: | 285-286p | 12-MONTH HIGH: | 331p | LOW: 236p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 36 | |
| NET ASSET VALUE: | 158p* | NET DEBT: | 32% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 1.04 | 109 | 20.8 | 11.0 |
| 2011 | 1.08 | 91 | 13.8 | 7.4 |
| 2012 | 1.05 | 6.3 | -0.9 | 7.6 |
| 2013 (restated) | 1.47 | 144 | 7.9 | 7.75 |
| 2014 | 1.38 | 129 | 7.9 | 8.1 |
| % change | -6 | -10 | - | +5 |
Ex-div: 16 Apr Payment: 18 May *Includes intangible assets of £2.4bn, or 242p a share | ||||
