Prospects at engineering group Melrose are so good that that management has no plans to sell core businesses for at least a year, while another big acquisition looks likely.
Indeed, recovery in the US and weakness here have generated more takeover candidates recently, and chief operating officer Simon Peckham, who takes over from chief executive David Roper at the annual meeting, expects to have made a move "within a few months". The battle over Charter shows that Melrose won't overpay, but an off-market deal north of £1bn looks likely. It could be in any sector, too, not necessarily in oil & gas, mining or power generation - the main forces behind last year’s rapid growth.
Meanwhile, underlying operating profit rose 24 per cent at both the higher margin energy division, driven by demand for Brush electricity generators, and in lifting, where Crosby had its best year since a record 2008. Order books are strong, too. Overall, Melrose's operating profits rose 23 per cent to £181m in 2011, and the operating margin reached 15.7 per cent, putting its 17 per cent target within reach. Indeed, momentum has carried over in to 2012 and strong cash generation should continue to bankroll a key investment phase for Melrose.
Broker Panmure Gordon expects underlying EPS of 30.7p for 2012 (28.8p in 2011).
MELROSE (MRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 379p | MARKET VALUE: | £ 1.48bn | |
| TOUCH: | 379-380p | 12-MONTH HIGH: | 395p | LOW: 264p |
| DIVIDEND YIELD: | 3.4% | PE RATIO: | 15 | |
| NET ASSET VALUE | 166p* | NET DEBT: | 45% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2007 | 0.29 | 24.0 | 8.70 | 6.8 |
| 2008 | 0.90 | 23.5 | 4.10 | 7.0 |
| 2009 | 1.30 | 82.0 | 11.0 | 7.7 |
| 2010 | 1.04 | 109 | 20.8 | 11.0 |
| 2011 | 1.15 | 97.4 | 25.2 | 13.0 |
| % change | +11 | -11 | +21 | +18 |
Ex-div: 11 Apr Payment: 14 May *Includes intangible assets of £906m, or 232p per share | ||||
