Melrose Industries, an engineering company that seeks to acquire businesses it understands, improve them by a mixture of investment and changed management focus, realise the value created and then return it to shareholders. I have a holding in my income portfolio (epic code: MRO).
Today Melrose Industries released an IMS for the period 1 July to 19 November and stated that trading is in line with expectations. I just wish that management would be consistent in their reporting on the business segments, rather than leave investors to infer from their comments on progress. I have added my interpretation of management's comments in blue.
Elster Gas on a constant currency basis revenue is up 4%, matched by a very similar rise in order intake.
Elster Electricity on a constant currency basis sales are up 5% and order activity is consistent with expectations for the year. Probably means that order intake is below the rate of sales growth.
Elster Water has seen the most significant increase to headline operating margins since acquisition and its second half margins are in line with expectations. Probably means that sales and order intake are weak.
Brush continues to experience slower turbogenerator sales offset, in part, by improved aftermarket performance. So probably a decline in sales and weak order intake.
At current exchange rates management expect an adverse currency effect of approximately 7% for the full year.
After the purchase of Eclipse for £99m and the sale of Bridon for £365m, leverage at the end of the year is expected to be below 2x EBITDA, although that will increase somewhat after the planned return of capital.
Commenting on the planned return of capital management stated that "...Early next year the Board of Melrose expects to recommend a return of capital to shareholders. The exact amount is yet to be decided but it is expected to be approximately £200m..." so about 18.5p per share.
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