Industrial Photo

Melrose Industries

LSE: MRO

Market Cap£5,358m

Last Close 132.15p

Melrose Industries acquires underperforming industrial companies. It undertakes operational improvements through restructuring and investment before disposing of the assets. Deals are individually financed through new equity (and debt) with proceeds returned in cash post value realisation.

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Investment summary

Melrose has a proven track record for its ‘buy, improve, sell’ strategy having completed four transactions since 2005 generating an IRR for shareholders of c 20%. The latest transaction, GKN (acquired in 2018) is well advanced in restructuring, hence the decision to demerge the Automotive business to enable it to develop its EV opportunities as a standalone entity while Melrose/Aerospace is expected to be re-rated ex automotive and offer a platform for the next stage of Melrose development.

Y/E Dec
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (fd) (p)
P/E (x)
P/CF (x)
2020A 7723.0 521.0 (41.0) (0.6) N/A 12.3
2021A 7496.0 734.0 252.0 4.1 32.2 8.5
2022E 7718.0 831.0 307.0 5.6 23.6 6.8
2023E 8334.0 1016.0 466.0 8.8 15.0 5.3
Industry outlook

Interim results were in line with expectations with no change to full year guidance. Automotive margins made progress on H221 but were held back by the industry supply chain/chip issues and inflationary pressures, both of which are set to improve in H2. Aerospace margins continue to recover which, with restructuring programmes all now underway and the market starting to recover, bodes well for achieving targeted 14% margin.

Last updated on 30/11/2022
Content on Melrose Industries
Melrose Industries – Releasing the potential
Industrials | research Update | 29 September 2022
close up photo of futuristic 3d printer. micro and nano electronics b
Melrose Industries – Two are better than one
Industrials | research Flash note | 8 September 2022
close up photo of futuristic 3d printer. micro and nano electronics b
Melrose Industries – Aerospace rising
Industrials | research Update | 10 June 2022
close up photo of futuristic 3d printer. micro and nano electronics b
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Share price graph
Balance sheet
Forecast net debt (£m) 1387
Forecast gearing ratio (%) 20
Price performance
%
1m
3m
12m
Actual 13.1 (3.2) (8.9)
Relative* 5.9 (6.3) (11.4)
52-week high/low 173.5p/95.5p
*% relative to local index
Key management
Simon Peckham CEO
Geoff Martin FD
Christopher Miller Executive Vice Chairman