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Melrose Industries

LN: MRO

Market Cap£6,122m

Last Close 151p

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 Aerospace (acquired in 2018) is well advanced in restructuring suggesting it will enter the disposal and value realisation phase in 2022/23. Edison’s sum-of-the-parts on disposal and discounted back to 2022 suggests a valuation of 246p per share.

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 14.1
2021A 7496.0 734.0 252.0 4.1 36.8 9.7
2022E 7718.0 831.0 307.0 5.6 27.0 7.8
2023E 8334.0 1016.0 484.0 9.2 16.4 6.0
Industry outlook

GKN restructuring is continuing with all programmes expected to be underway by the end of 2022. This can be seen in the margin progression from 1.2% to 4.5% in 2022 and Edison forecast of 5.6% in 2023, despite automotive supply chain and volume issues. Management remain committed to significant further upside with Aerospace increased to 14%+ from 12%, Automotive to over 10% and Powder Metallurgy to 14%, which should translate to double-digit returns and drive overall shareholder value creation. The recent change to forecasts reflects disposal of Ergotron.

Last updated on 10/08/2022
Content on Melrose Industries
Melrose Industries – Aerospace rising
Industrials | research Update | 10 June 2022
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Melrose Industries – Accelerating sustainability
Industrials | research Update | 17 May 2022
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Share price graph
Balance sheet
Forecast net debt (£m) 1185
Forecast gearing ratio (%) 17
Price performance
%
1m
3m
12m
Actual (3.1) 35.2 (11.4)
Relative* (7.5) 30.4 (12.3)
52-week high/low 190.8p/107.6p
*% relative to local index
Key management
Simon Peckham CEO
Geoff Martin FD
Christopher Miller Executive Vice Chairman