Manufacturing turnaround specialist Melrose Industries (MRO) continued to lay out the case for its proposed takeover of engineering group GKN (GKN) in its annual results announcement, with chair Christopher Miller saying he was “convinced that GKN would gain significantly from becoming part of an enlarged £10bn UK industrial powerhouse”. However, our sister publication, the FT, notes that Jeremy Corbyn chose results day to single out the company in a speech to the EEF, a manufacturing industry organisation, citing Melrose’s “history of opportunistic asset-stripping”.
The company would be likely to respond by highlighting the transformation of Nortek Air Solutions, a company it acquired in 2016. Management is reporting a 52 per cent increase in adjusted operating profits through last year, and a 67 per cent rise over the last full year prior to acquisition, as well as a 5.5 percentage point improvement in operating margins to 15.2 per cent. This means the group has met its original three- to five-year targets for the company within 18 months.
Conversely, Brush, the group’s 2008 acquisition, has continued to struggle due to structural change in the global gas turbine market, leading the group to announce a consultation and £40m of restructuring measures to help it adapt. Impairments against Brush assets slashed £145m from statutory profits.
Bloomberg consensus estimates put expectations for 2018 adjusted EPS at 10.3p, from 9.8p in 2017.
| MELROSE (MRO) | ||||
| ORD PRICE: | 224p | MARKET VALUE: | £ 4.35bn | |
| TOUCH: | 224-224.4p | 12-MONTH HIGH: | 262p | LOW: 195p |
| DIVIDEND YIELD: | 1.9% | PE RATIO: | NA | |
| NET ASSET VALUE: | 97p* | NET DEBT: | 30% | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 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 |
| 2017 | 2.09 | -27.6 | -1.2 | 4.2 |
| % change | +135 | - | - | +91 |
| Ex-div: | 05 Apr | |||
| Payment: | 21 May | |||
| *Includes intangible assets of £2.24bn, or 115p a share | ||||
