7th Sep 2023 13:44
(Alliance News) - Melrose Industries PLC reassured investors on Thursday with "solid" upgraded full-year guidance, despite some significant changes at the top.
"Melrose is flying into markedly improved conditions and although change at the top can be unsettling, the ready replacements for the CEO and group finance chief will limit turbulence," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
Shares in the Birmingham, England-based aerospace manufacturer were up 4.1% to 530.00 pence each Thursday afternoon, following the results. It was the best FTSE 100 performer.
Melrose said that Co-Founder & Chief Executive Simon Peckham will step down in March next year, following its successful rebrand as a long-term aerospace group.
Peckham co-founded Melrose back in 2003 and has been with Melrose ever since. It is therefore unsurprising that Stifel described his departure as an "end of an era."
Peckham will be replaced by Peter Dilnot, currently Melrose chief operating officer. Streeter said that this is "a manoeuvre which should reassure investors, given he's been guiding recent changes."
In April, Melrose completed the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses from the company into Dowlais Group PLC. Dowlais is now a FTSE 250 constituent.
It also noted Finance Director Geoffrey Martin will step down on the same date as Peckham. Martin had joined as finance director in 2005.
Meanwhile, Matthew Gregory, who is chief financial officer of GKN Aerospace, has been named as the new finance director.
Stifel said that the new management team is "more conventional" following its restructure.
"While it was always clear that with the buy/fix/sell cycle coming to an end, the Melrose team would
move on, this news probably comes a little earlier, and in a slightly more sweeping fashion, than generally expected," Stifel added
Also on Thursday, Melrose said that it traded ahead of expectations in the first half of 2023, as it delivered its first set of results as a pure play aerospace company. Stifel described the results as "excellent."
Revenue rose to GBP1.63 billion from GBP1.36 billion a year earlier. Pretax loss narrowed to GBP62 million from GBP314 million.
Melrose said it will pay an interim dividend of 1.5 pence per share, up from 0.825p a year earlier.
It also said that it will be beginning its share buyback programme early, at the beginning of October. This will start with a GBP500 million buyback over 12 months.
Looking ahead, Melrose upgraded its annual guidance, it guides for Aerospace adjusted operating profit between GBP375 million and GBP385 million, which is over 8% higher than prior guidance. It is also expecting revenue between GBP3.35 billion and GBP3.45 billion.
Melrose had reported revenue of GBP7.54 billion in 2022, though that included Dowlais Group PLC. It had reported Aerospace operating profit of GBP186 million.
Streeter said the "bright" outlook "appears to be solid."
CEO Peckham said: "We are delighted with these results and the outlook for Melrose. Whilst there is still work to do, the business is very capable of producing over GBP1 billion of Ebitda and providing excellent returns for shareholders. This is further demonstrated by the confidence to start early the share buyback programme."
By Sophie Rose, Alliance News reporter
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