Melrose Industries PLC (LON:MRO) said trading has been better than expected. Half year underlying revenues rose 5.6% to £3.8bn, reflecting a strong performance in Automotive and Powder Metallurgy.
Q2 2021 hedge fund letters, conferences and more
Underlying profits rose to £109m from a loss of £80m last year. However, including restructuring costs, those associated with acquisitions and disposals and amortisation charges, the group reported a loss of £151m.
In addition to a 75p interim dividend, Melrose will return an additional 15p per share to shareholders, following the sale of Nortek Air Management and Brush. Melrose said it has capacity for “a significant further capital return next year.”
The shares were up 4.5% in early trading.
Melrose Q2 Results
Laura Hoy, Equity Analyst at Hargreaves Lansdown:
“Melrose knocked its first half results out of the park, with Automotive responsible for the majority of the group’s underlying profits. Restructuring efforts are starting to bear fruit and barring any further disruption from the semi-conductor shortage, the division could hit it’s 10% margin target if sales recover to 2019 levels in 2022.
Aerospace continued to drag on results as the pandemic continues to weigh on the sector, but management has seen an encouraging uptick in narrowbody build rates. As long as the pandemic continues to dissipate, we expect the segment to continue on the path to recovery.
Melrose has been working to get its balance sheet in check, with a series of disposals, cost saving efforts and a massive reduction in pension obligations. That’s opened the door for rising shareholder returns, and we were encouraged to see the group upping its capital returns by 15p this year. If all goes to plan, there should be more where that came from.
That’s not to say it’s all smooth sailing ahead, though. Melrose is at the centre of several strong headwinds. Supply chain issues, input inflation and pandemic-related disruption continue to hang like a dark cloud over the group’s progress. However, you can’t knock Melrose’s progress—restructuring during a pandemic is no small feat.”
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