Engineering firm Melrose Industries (MRO) gained 4.6% to 179.8p to top the risers on the FTSE 100 after it confirmed alongside first half results it was ‘trading ahead of expectations, with better profit margins, better earnings per share and significantly lower net debt’.
The fall in borrowings underpinned plans for a further return of capital to shareholders in 2022. This follows the approved and imminent £730 million being paid out to shareholders from the proceeds of the £2.6 billion sale of Nortek Air Management.
The company, which specialises in buying and turning around industrial businesses and acquired GKN in a high-profile and controversial deal in 2018, reported a 5.6% year-on-year increase in adjusted revenue to £3.83 billion for the six months to 30 June 2021.
Adjusted profit after tax swung from a £80 million loss in 2020 to a £109 million profit. Free cash flow came in at £75 million.
IMPROVING MARGINS ACROSS THE BUSINESS
On a statutory basis the company reported a narrowed pre-tax loss of £256 million, down from £720 million.
Melrose reported that all businesses improved their adjusted operating margin in the period compared to 2020 full year: Aerospace by +2.9 percentage points; Automotive by +4.0 percentage points; Powder Metallurgy by +6.9 percentage points; and Ergotron by +0.8 percentage points.
Automotive and Powder Metallurgy were also ahead of plan on their restructuring projects.
Net debt was down from £3.4 billion to £300 million although the company reported that the imminent return of capital to shareholders would lift this number to £1.03 billion.
Chairman Justin Dowley commented: ‘We have scope on our balance sheet to return more money to shareholders next year and we are excited by the upcoming possibilities.’
