Shares in Melrose Industries (MRO) are still flying high nearly a month after the group agreed to buy Nortek (US:NTK), a manufacturer of air management, security, home automation and productivity solutions for $1.4bn (£1.06bn) via a reverse takeover. By way of reminder, the deal will be financed by a 12-for-one rights issue and new $1.2bn debt facility.
This is typical strategy for Melrose, which has a history of buying manufacturing companies, investing heavily in them and selling them for a profit. Since the group's inception, bosses claim this buy-improve-sell strategy has garnered more than £2.8bn in shareholder value. Investors have been handsomely rewarded of late: in February, the group gave back roughly £2.4bn via a one-off capital return following the sale of gas and electricity business Elster.
That said, Melrose is navigating some difficult trading conditions right now. Brush - which manufactures turbo generators and other electricity-generating equipment - recorded a 13 per cent revenue decline at constant currencies, and a 20 per cent slump in headline operating profits during the first half after a slump in orders.
Prior to news of the Nortek deal, analysts at Numis expected pre-tax profits of £77.3m for the year ending December 2016, giving EPS of 7.6p, compared with £23.8m and 9.2p in 2015.
| MELROSE INDUSTRIES (MRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 685p | MARKET VALUE: | £993m | |
| TOUCH: | 684.5-685p | 12-MONTH HIGH: | 685p | LOW: 255p |
| DIVIDEND YIELD: | 0.5% | PE RATIO: | NA | |
| NET ASSET VALUE: | 327p* | NET CASH: | £51m | |
| Half-year to 30 June | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p)** | Dividend per share (p)** |
|---|---|---|---|---|
| 2015 | 116 | -13.6 | -0.2 | 0.4 |
| 2016 | 105 | -9.2 | -3.2 | 1.4 |
| % change | -10 | - | - | - |
Ex-div: 4 Aug Payment: 1 Sep *Includes intangible assets of £285m, or 196p a share **2015 figures adjusted for seven-for-48 share consolidation; excluding 240p special dividend | ||||
