Buying German utility meter maker Elster last summer was widely regarded as a sensible move by turnaround specialist Melrose Industries (MRO) and progress in the first four months of ownership bears that out. Improvements there are already running a year ahead of plan and margins, up at 14.1 per cent, have risen faster than expected, too - and they could even be much higher in a couple of years, according to bullish analysts.
That's a relief given the company warned in November of slower sales and thinning order books in a number of areas. This remains the case, particularly in the energy division, where Melrose has just six months visibility, although management still predicts progress this year and, once you strip out substantial restructuring and finance costs (much to do with Elster), pre-tax profit jumped 39 per cent to £214.3m in 2012 and EPS was up a fifth to 16.1p. Underlying operating profit grew 15 per cent at the lifting division, driven largely by demand from the oil and gas sector and from Asia at lifting fittings business Crosby. It was slower going at Brush, where sales orders for large generators suffered delays and a trend towards smaller equipment meant that the value of orders for new-build generators fell. Fortunately, aftermarket work, particularly in the US, should mitigate some of the impact in 2013.
UBS forecasts adjusted EPS of 16.98p in 2013.
MELROSE INDUSTRIES (MRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 260p | MARKET VALUE: | £3.29bn | |
| TOUCH: | 260-261p | 12-MONTH HIGH: | 278p | LOW: 198p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 59 | |
| NET ASSET VALUE | 137p* | NET DEBT: | 57% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p)** | Dividend per share (p)** |
|---|---|---|---|---|
| 2008 | 0.90 | 23.5 | 2.33 | 3.98 |
| 2009 | 1.30 | 82.0 | 6.26 | 4.38 |
| 2010 | 1.04 | 109 | 11.8 | 6.26 |
| 2011 | 1.08 | 91.0 | 13.8 | 7.40 |
| 2012 | 1.55 | 92.0 | 4.40 | 7.60 |
| % change | +44 | +1 | -68 | +3 |
Ex-div: 17 Apr Payment: 13 May *Includes intangible assets of £3bn, or 238p a share **Adjusted for rights issue | ||||
