Last year was an exciting one for Melrose Industries' (MRO) shareholders. After receiving £2.4bn from the sale of Elster in February, the turnaround specialist's investors were then asked to stump up £1.6bn in a 12-for-one rights issue to help fund the reverse takeover of air management, security, home automation and productivity solutions specialist Nortek in August for an enterprise value of £2.2bn.
Nortek more than tripled Melrose's revenue, although that perhaps shouldn't come as a big surprise given the size of the deal. Still, shareholders who took up their rights will be pleased with how Melrose, which specialises in buying, polishing and selling underperforming manufacturing companies, worked its magic in the first four months of ownership.
By quickly removing Nortek's board, closing its headquarters and decentralising all its corporate functions, management increased the company's underlying operating profit by 35 per cent and widened its underlying operating margin by 4.1 percentage points to 13.4 per cent. Those impressive savings distracted attention from Melrose's troubled Brush business, which continued to be impacted by weak capital spending across the gas turbine and energy sectors.
Analysts at Numis expect pre-tax profit of £280m this year, giving EPS of 10.4p, compared with £92m and 4.4p in 2016.
| MELROSE INDUSTRIES (MRO) | ||||
|---|---|---|---|---|
| ORD PRICE: | 230.8p | MARKET VALUE: | £4.35bn | |
| TOUCH: | 230.8-231p | 12-MONTH HIGH: | 251p | LOW: 63p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | na | |
| NET ASSET VALUE: | 115p* | NET DEBT: | 25% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 1.05 | 6.3 | -0.9 | 7.6 |
| 2013 | 1.47 | 144 | 7.9 | 7.8 |
| 2014 | 0.32 | 12.5 | 0.8 | 5.3 |
| 2015** | 0.26 | -30.7 | -0.3 | 1.0 |
| 2016 | 0.89 | -69.3 | -2.6 | 2.2 |
| % change | +241 | - | - | +120 |
Ex-div: 6 Apr Payment: 16 May *Includes intangible assets of £2.7bn, or 141p a share **EPS and DPS adjusted to reflect August 2016 rights issue | ||||
