Nearly a year and a half after completing the hostile takeover of engineer GKN, the turnaround group generated £6.0bn of adjusted revenue in the six months to 30 June, double that of a year ago, while statutory revenue was also doubled to £5.7bn.
Statutory losses narrowed to £128mln from £372mln.
Adjusted operating profit was £539mln, which takes account of £550mln of adjusting items of which £79mln are cash. For the full year, analysts expect around £1.08bn-£1.09bn
Stronger cash generation led to leverage coming in better than expected, with debt at 2.3 times underlying earnings (EBITDA), and the interim dividend was lifted 10% to 1.7p per share.
Looking to improve
Referring to the group’s ‘buy, improve, sell’ maxim, chairman Justin Dowley said: “These results show the initial fruits of the ‘improve’ stage of Melrose‘s ownership of GKN and, with the overall GKN margin increasing positively, we are excited about what is possible.”
This year Melrose has invested in Aerospace technology and continued with operational improvements in this business, seeing organic growth of 7% for the half and operating profit up 37%.
While the Driveline business remained largely weak in line with wider auto industry trends, Dowley hailed the “substantial” development of the eDrive electric vehicle powertrain.
Asia, including a Chinese joint venture, remains a difficult area for this business, with sales down 17% to drag Melrose’s Autos arm down 7% vs the market at 5% with Asia down 17%.
After the “very good performance” in Aerospace, analysts at UBS said they do not expect full-year consensus forecasts to change “but investors should be reassured post the 1H delivery”.
Indeed, shares were up 7% to 198.4p at Thursday lunchtime.
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