3rd Mar 2022 15:46
(Alliance News) - Melrose Industries PLC shares dropped on Thursday after the industrial turnaround firm decided to keep the timing of a capital return "under review", following Russia's invasion of Ukraine.
Melrose, which specialises in buying and improving manufacturing firms, posted largely strong annual results. This was not enough to spare it from the market's ire, however.
The stock was down 5.3% at 134.25 pence each in late trade in London on Thursday.
"In line with the Melrose model, to return proceeds from disposals to shareholders, your board would have made a second capital return to rebase our capital structure alongside these results," the company said.
"However, the very recent and tragic events unfolding in Ukraine, with the knock on effects for the world markets that at this stage are uncertain and unquantifiable, have led the board to keep the timing of this return under review at present."
Melrose admitted it is a "conservative position" to take.
Hargreaves Lansdown analyst Laura Hoy commented: "The market tends to react poorly to unexpected bad news. That's exactly what happened this morning when Melrose announced it would withhold a planned shareholder distribution related to the sale of Brush and Nortek. Melrose is a master at flipping businesses-buying struggling or unprofitable companies and selling them for a profit. A chunk of those profits are funneled straight into shareholders' pockets.
"The pandemic meant Melrose held on to much of its recent sale proceeds as a safety net, citing market uncertainty. Most expected the group would announce plans to release that capital at the full year. Instead the group's keeping its cash cushion a little longer as the crisis in Ukraine continues to roil markets."
In June, Melrose had unveiled a GBP730 million return to shareholders after completing the GBP2.62 billion disposal of its Nortek Air Management division to Chicago-based Madison Industries LLC.
AJ Bell analyst Russ Mould added: "The big fall for Melrose [shares] seemed at odds with results which were ahead of expectations, however the decision to delay the return of capital from the sale of several businesses in 2021 spoke volumes."
Melrose's revenue for 2021 was down 3.5% to GBP6.88 billion from GBP7.13 billion the year before. Adjusted revenue was GBP7.50 billion, up 2.0% on 2020 when adjusted on a constant currency basis.
Its pretax loss had narrowed slightly to GBP618 million from GBP679 million the prior year. Melrose said its results were ahead of expectations, and with larger cash generation, net debt reduced to GBP950 million from GBP2.83 billion.
By Eric Cunha; [email protected]
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