Interim Management Statement

RNS Number : 9145G

Melrose Industries PLC

13 May 2014

 



13 May 2014

MELROSE INDUSTRIES PLC

AGM AND INTERIM MANAGEMENT STATEMENT

Melrose Industries PLC issues the following Interim Management Statement for the Period from 1 January 2014 to today (the "Period").

 

EXECUTIVE SUMMARY

 

Trading remains in line with full year expectations with order intake in the period up 3% over the same period last year.

 

Melrose's two largest businesses, namely Elster Gas and Brush, both have good visibility with current order books equivalent to four and six months respectively. Their current order books support the full year expectations, notwithstanding that the year has started slower than last year which largely reflects the previously indicated rate of order intake through the second half of last year. Accordingly the current phasing of the order book suggests that the Group results will be biased toward the second half of the year.

 

Restructuring and investment opportunities continue to be pursued and it is pleasing that in the first half of 2014 Melrose is expected to have one of its highest periods of capital investment as a ratio to depreciation. The underlying cash generation remains encouraging with working capital being efficiently managed in the period.

 

ELSTER

 

The Elster Gas business has achieved a 10% increase in order intake compared to the same period last year although underlying sales year to date are down 1% year on year. The Gas division remains well placed to deliver on expectations for the year and further investment to increase capacity has been made in the period.

 

The Elster Electricity business shows encouraging signs of significant growth for the year though trading is, as usual, weighted to the second half and notably the final quarter.

 

Elster Water continues to show a much improved performance since acquisition. The restructuring projects are largely complete and continue to impact positively on its performance. It is well positioned for a successful 2014.

 

FKI

As has been well signalled, Brush is trading in end markets for power generation which have been slow for a while; consequently revenue was down in the period as expected.

However it is pleasing to see that the order intake for Brush was up 8% in the period. While this is expected primarily to affect 2015, it is encouraging that a return to growth in orders is being seen in this business.

Bridon is still being held back by a tough mining end market and consequently order intake is down 3% in the period. Cost cutting measures have been carried out in Bridon to support financial performance for the year and to ensure that Bridon remains well placed to benefit from the mining sector upturn when it arrives.

 

EXCHANGE

 

As stated in the annual report, exchange rates are adversely affecting profit in 2014. At that time this was expected to create a c.5% adverse effect on the Melrose performance this year. However exchange rates have deteriorated a little further and were the current rates to continue for the remainder of the year, this would impact performance by a further c.1%.

 

CASH GENERATION AND NET DEBT

 

As expected, following the c.£600 million return of capital to shareholders in February 2014, leverage has returned to more normal levels for Melrose and net debt is expected to be around 2.5x EBITDA at the half year which would demonstrate continued focus on cash management in the first half given the significant capital investment during the period.

 

OUTLOOK

 

The Board continues to be confident of meeting expectations for the full year albeit with the order book suggesting a larger weighting towards the second half of the year.

 

The macro environment still makes significant and consistent revenue growth hard to achieve but the improvement and investment opportunities continuing to arise in the Melrose businesses are encouraging.

 

The Board is keen to find a suitable and value enhancing acquisition and will proceed when a target is found but will, as ever, remain patient until that happens.

 

 

 

1.     All numbers are at constant currency where applicable

2.     Headline operating profit before depreciation and amortisation

3.     Before exceptional costs, exceptional income and intangible asset amortisation

 

 

 

 

 

-ends-

 

Enquiries:

CTF Corporate & Financial:

Charlotte McMullen                                                                                 [phone]

 

END

 

 

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