5th Mar 2020 08:29
(Alliance News) - FTSE 100 turnaround specialist Melrose Industries PLC on Thursday said annual profit performance comfortably beat internal expectations.
The company also said it is considering a sale of the Air Management operations of Nortek.
Melrose delivered a pretax profit of GBP106 million for 2019, swinging from a pretax loss of GBP542 million the year before. On an adjusted basis, pretax profit was 32% higher at GBP889 million.
Birmingham-based Melrose delivered revenue of GBP10.97 billion in the year, up 35%.
The company is paying a final dividend of 3.4 pence per share, giving a total for the year of 5.1p, up 11% on 2018's payout.
Melrose has operations in the aerospace, automotive, and powder metallurgy industries through GKN, which it bought following a protracted GBP8.4 billion takeover in 2018. It also owns Nortek Air & Security, which makes things such as air conditioners and heat pumps.
Melrose said GKN is gaining momentum after its first full year of ownership. Aerospace revenue rose 7%, though automotive revenue was down 6% in line with a soft market.
This downturn in the automotive sector also had an impact of the powder metallurgy business, Melrose said, which was exacerbated by the strike at General Motors Co. Sales fell 10% in the power metallurgy unit in 2019.
Nearly 50,000 GM workers downed tools in mid-September, launching the biggest labour dispute to hit the carmaker in more than a decade. The strike ended in October after a 40-day walkout.
Nortek had "another" strong year, Melrose continued, though the company has now appointed advisors to look into the future of the Nortek Air Management business. It is "clear", however, that recent events such as coronavirus may impact timing.
If a sale were to occur, Melrose would use the process to reduce debt and make an "exceptional repayment" to shareholders as well as increase pension contributions at GKN.
Chair Justin Dowley said: "We are delighted with the Melrose performance in 2019 and the substantial value that is being unlocked. Notwithstanding any implications of the COVID-19 outbreak, the bedrock has now been built for the GKN businesses to attain results which were not previously achievable, and, in addition, the shareholder value built up in our longer held assets is closer to being realised.
"This shows, once more, that the Melrose model thrives by investing properly in businesses and giving management the entrepreneurial freedom to succeed. This is just the start of what is possible for GKN."
Melrose, looking to 2020, expects another year of progress in each business. It is too early to quantify the impact of coronavirus, the company said, and it remains focused on "what we can control".
Melrose shares were 3.5% higher on Thursday morning in London in early trading at 212.20p each.
By George Collard; [email protected]
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