Melrose Industries — Continued outperformance

Melrose Industries (LSE: MRO)

Last close As at 22/05/2024

GBP6.70

74.80 (12.57%)

Market capitalisation

GBP8,167m

More on this equity

Research: Industrials

Melrose Industries — Continued outperformance

Melrose Industries’ shares have been re-rated over the past year, reflecting the company becoming a pure aerospace group and its improving operational performance. Attractions remain from the Risk and Revenue Sharing Partnerships (RRSPs) and associated cashflows along with the investments being made, such as in additive fabrication, to drive organic growth beyond the already positive aerospace market.

David Larkam

Written by

David Larkam

Analyst, Industrials

Industrials

Melrose Industries

Continued outperformance

Full year results

Aerospace and defence

8 March 2024

Price

618p

Market cap

£8.2bn

Net debt (£m) at 31 December 2023

572

Shares in issue (excluding treasury shares)

1,324m

Free float

98.1

Code

MRO

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

3.5

12.5

80.6

Rel (local)

2.4

9.4

85.6

52-week high/low

640p

309p

Business description

Melrose Industries is a focused aerospace group with activities in engine components and structures, operating in both metallic and composite materials. The group has significant risk reward sharing partnership investments on multiple engine programmes.

Next event

AGM

2 May 2024

Analyst

David Larkam

+44 (0)20 3077 5700

Melrose Industries is a research client of Edison Investment Research Limited

Melrose Industries’ shares have been re-rated over the past year, reflecting the company becoming a pure aerospace group and its improving operational performance. Attractions remain from the Risk and Revenue Sharing Partnerships (RRSPs) and associated cashflows along with the investments being made, such as in additive fabrication, to drive organic growth beyond the already positive aerospace market.

Year
end

Revenue
(£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/22

2,954

89

4.1

2.3

150.7

0.4

12/23

3,350

331

19.5

5.0

31.7

0.8

12/24e

3,677

456

26.7

6.7

23.1

1.1

12/25e

4,028

575

34.3

9.3

18.0

1.5

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

2023 results: Ahead of expectations

Underlying PBT of £331m was 4.4% ahead of our forecast of £317m and underlying EPS, at 19.5p, was 5% ahead of our 18.6p forecast. Melrose reported organic growth of 13%, with 17% underlying, taking into account business being exited. Underlying operating profit increased 165% to £390m, with strong margin expansion from 5% to 11.6%. Engines reported organic revenue growth of 16%, with operating margins up from 15.7% to 26%, driven by strong aftermarket business. Structures reported organic growth of 18% (12% excluding exited business) driven by civil, which was up 28%, while defence remained flat. Structures’ operating margin increased from 1.3% to 5.1% due to restructuring, contract repricing and volume benefits. Net debt was £572m, excluding finance leases and after £93m of the current £500m share buyback programme, with net debt/EBITDA at 1.1x.

Forecast changes: Continued upgrades

Management has increased adjusted operating profit guidance for FY24 by c 6% at the underlying operating EBIT level. FY25 guidance, however, remains unchanged to reflect market risks, such as the current supply chain issues in the aerospace sector. Management’s new guidance has been factored into our updated forecasts, along with the Melrose long-term incentive plan (LTIP), which matures in May, diluting the EPS numbers. Our FY24 underlying EBIT has changed from £518m to £537m, underlying PBT has gone up from £441m to £456m and EPS is now 26.7p from 27.0p previously. Our FY25 operating numbers (EBIT) remain unchanged. However, our PBT has lowered from £589m to £575m and EPS from 37.2p to 34.3p, reflecting higher financing charges from the completed buyback and the LTIP additional shares in issue.

Valuation: Upgrade by 2%

We have updated our valuation using a combination of peer valuations and cash NPV for the RRSPs activities giving Melrose a value of 654p/share, up from 643p previously. This now also takes into account the Melrose LTIP, due to crystalise in May, but not the remainder of the share buyback, which will have a limited impact at the current share price.

2023 Results

2023 was Melrose’s first year reporting as a stand-alone, focused aerospace group, following the demerger of Dowlais automotive in April 2023. The group reported organic growth of 13%, with 17% underlying taking into account business being exited, to £3.35bn. Underlying operating profit increased 165% to £390m. This was driven by strong margin expansion from 5% to 11.6%. Underlying EPS increased from 4.1p to 19.5p (18.7p fully diluted). The dividend for the year was 5.0p. Net debt was £572m, excluding leases, but after £93m of the current £500m share buyback programme, with net debt/EBITDA at 1.1x. Note the loss on discontinued operations, ie the exit of Dowlais, was £1.0bn.

Exhibit 1: Profit and loss (£m)

Year to December

2022

H1

H2

2023

Organic growth

 

 

 

 

Engines

 

19.0%

13.0%

16.0%

Structures

 

13.0%

21.0%

17.0%

Group organic growth

8.5%

15.1%

18.2%

16.6%

Engines

1,035

608

585

1,193

Structures

1,919

1,025

1,132

2,157

Aerospace

2,954

1,633

1,717

3,350

Revenue

2,954

1,633

1,717

3,350

Operating margin

Engines

15.7%

24.5%

27.5%

26.0%

Structures

1.3%

2.5%

7.4%

5.1%

Aerospace

6.3%

10.7%

14.3%

12.5%

Group operating margin

5.0%

9.7%

13.5%

11.6%

Underlying operating profit

Engines

162

149

161

310

Structures

24

26

84

110

Aerospace

186

175

245

420

Central costs

(39)

(16)

(14)

(30)

Group underlying operating profit

147

159

231

390

Intangibles amortisation

(260)

(131)

(129)

(260)

Exceptionals

Release of fair value items

27

1

(1)

0

Exchange adjustments

(79)

28

86

114

Reorganisation costs

(90)

(49)

(100)

(149)

Other

(15)

(26)

(12)

(38)

EBIT (reported)

(270)

(18)

75

57

Financing charges

(58)

(44)

(21)

(59)

Exceptional financing charges

0

0

0

(6)

PBT reported

(328)

(62)

54

(8)

PBT before exceptionals

89

115

210

331

Source: Melrose

Engines

Engines reported organic revenue growth of 16%. Original equipment (OE) growth was 3%, due to ongoing supply chain challenges, but the more profitable aftermarket business grew by 34%, including 40% in civil engines. This was ahead of the market, which saw international air traffic increase 35% and domestic air traffic by 26%. Operating margin expanded strongly from 15.7% to 26.0%, benefitting from a mix of higher growth in the more profitable aftermarket, restructuring, operational gearing and pricing. Operationally, investment continues with the additional repair shop capacity in North America, along with investment in additive fabrication capacity (£50m invested).

Growth in 2024 is expected to be driven by the aftermarket business, with similar underlying trends as seen in 2023, in particular increased flying hours and additional/extended maintenance shop visits, due to the requirement to prolong aircraft life to meet current demand. The repair side of the business, which grew 24% in 2023, will also benefit from Chinese certification of the Malaysian facility and a new site in the US (due to open in 2024). Benefits from Melrose’s recent extended contract with GE Aerospace, along with the investment in additive fabrication, are expected to come through in 2025 and beyond. The key uncertainty is likely to come from the smaller OE side of the business, with the potential for continued supply chain disruptions. Note that management has not changed its views on the Pratt & Whitney GTF engine issues at total cash impact of £200m, including £70m in FY24.

Structures

Structures reported organic revenue growth of 18%, 12% excluding exited business. Civil OE was up 28% although defence was flat, reflecting, in part, the exited business. Operating margin increased from 1.3% to 5.1%. Improvements were driven by restructuring benefits (the number of facilities has reduced from 40 in 2018 to 22), repricing of exiting of unprofitable business and operational gearing from market recovery.

The outlook remains positive with the key civil market expected to grow by double digits in 2024 and 2025, as highlighted in Exhibit 2. Melrose’s exposure to the Boeing 737MAX is limited, suggesting any potential impact from the recent safety issues should be minimal. Perhaps more of a concern is the state of the supply chain and whether this impacts the ability of the primes to expand production rates. The division will also see sales impacted from low-margin business intentionally exited and the recent disposal of a non-core fuel systems business. On a positive note, the group’s new Chinese facility serving COMAC is scheduled to start production in Q224.

Exhibit 2: Civil airliner delivery expectations Airbus & Boeing

Source: Boeing and Airbus

Cash flow

Net debt increased from £487m to £572m. Positive operating cash generation was offset by a £146m increase in working capital to support growth, £125m of restructuring spend, £93m share repurchase and continued investment in the business, with capex at £102m or 0.9x depreciation. The balance sheet remains strong with net debt/EBITDA at 1.1x. Net debt is expected to increase further in 2024, ostensibly from the outstanding £407m of the share repurchase scheme, due to be completed in H224. However, further restructuring spend of £120m is expected, as well as the potential GTF outflow of c £70m and working capital investment to support the growth.

Exhibit 3: Cashflow (£m)

Year to December

2022

H1

H2

2023

Operating profit (pre exc and g/w)

147

159

231

390

Depreciation and amortisation

145

71

71

142

EBITDA

292

230

302

532

Net change in WC

(148)

(169)

23

(146)

Restructuring

(60)

(53)

(72)

(125)

Pension etc

(23)

(2)

(20)

(22)

Other adjusting items

 

(19)

7

(12)

Operating cash flow

61

(13)

240

227

Returns and servicing of finance

(82)

(53)

(12)

(65)

Total tax paid

(8)

(15)

32

17

Net CAPEX

(31)

(40)

(53)

(93)

Free cash flow

(60)

(121)

207

86

Acquisitions and disposals

(7)

Equity dividends paid

(77)

(81)

(81)

Shares issued/(repurchased)

(93)

(93)

Net cash flow

(144)

(121)

33

(88)

Exchange rate differences

52

0

Other non-cash

3

0

3

Net cash/(debt) b/fwd

(487)

0

(487)

Movement in net debt

(144)

(66)

0

(85)

Net cash/(debt) pre finance leases

(487)

(553)

0

(572)

Source: Melrose

Strategy

The most significant event in the year was the change in strategy from Melrose’s historic acquisition-led ‘Buy, Improve, Sell’ model to being a focused aerospace group driven by organic growth. To achieve the required restructure, the Dowlais automotive business was demerged in April 2023. There has also been a change of management with Peter Dilnot (previously Melrose’s COO) becoming group CEO and Matthew Gregory (previously Aerospace’s divisional CFO) moving up to group CFO.

Melrose’s new philosophy is encapsulated in its ‘Design, Deliver, Improve’ philosophy. ‘Design’ reflects the technology within the business and its strategy to build partnerships through solving customer problems; thus becoming a solutions provider rather than a component supplier. ‘Deliver’ represents the operational drive to meet the highest expectation across all KPIs, such as quality, on-time delivery, financial performance, health and safety and environmental. ‘Improve’ retains the ‘old’ Melrose ethos for continued improvement, with a focus on operating margins, cash flow and shareholder returns.

Outlook and forecast changes

The company has provided specific guidance, including c 6% operating profit upgrade to FY24 (as detailed below along with the previous numbers where available). The growth in Engines is expected to be driven by the aftermarket business, which has a clear benefit to the division’s margins. The growth in Structures will be held back by business exits, with the margin progression driven by the restructuring but assisted by repricing. The H223 margin, while a seasonally stronger period, was 7.3%, adding confidence to guidance.

2025 targets have been left unchanged reflecting a degree of caution given the level of uncertainty that remains regarding how the supply chain issues could manifest themselves. However, management are clearly confident in the direction of travel as highlighted by the target for Engines margins of over 30% beyond 2025.

Exhibit 4: Management’s guidance summary

2024

2025

Old

New

Unchanged

Sales (£bn)

Engines

1.45–1.50

1.8

Structures

2.15–2.25

2.2

Group

3.5–3.7

3.6–3.75

4.0

EBIT pre central costs (£m)

Engines

410–420

500

Structures

140–150

200

Group

520–540

550–570

700

Operating margin (%)

Engines

28%

28%

Structures

7%

9%

Group

c 15%

>15%

17–18%

EBITDA pre central costs (£m)

Group

680–700

710–730

870

Central costs (£m)

Group

30

30

Source: Melrose

Exhibit 5 highlights the changes made to Edison forecasts.

Exhibit 5: Changes to Edison forecasts

2024

2025

£m

Old

New

Change

Old

New

Change

Revenues

3,657

3,677

0.5%

4,150

4,028

(2.9%)

EBITDA

688

699

1.5%

848

839

(1.0%)

EBITDA margin

18.8%

19.0%

1.1%

20.4%

20.8%

2.2%

Aerospace operating profit

543

567

4.4%

696

699

0.5%

Aerospace operating margin

14.8%

15.4%

0.6%

16.8%

17.4%

0.6%

Normalised operating profit

518

537

3.6%

673

669

(0.5%)

Normalised operating profit margin

14.2%

14.6%

0.4%

16.2%

16.6%

0.4%

Normalised PBT

441

456

3.4%

579

575

(0.7%)

Normalised basic EPS

27.0

26.7

(1.1%)

37.2

34.3

(7.8%)

Dividend per share

6.3

6.7

5.9%

9.3

9.3

0.0%

Net debt/(cash)

1,139

1,126

(1.2%)

1,051

1,023

(2.7%)

Source: Edison Investment Research

Exhibit 6 shows the changes made to Edison’s FY24 forecasts since the demerger of Dowlais automotive, with FY24 EPS cumulative upgrade of 17%.

Exhibit 6: Changes to Edison 2024 PBT forecasts since demerger (p/share)

Source: Edison Investment Research

Valuation

Our valuation methodology remains unchanged. As per our initiation note, we split the valuation into two parts: the RRSPs (which are associated with the Engines division’s aftermarket) and the main manufacturing operations in Structures and the Engines division.

Our RRSPs valuation remains unchanged at £5.3bn. This is below management’s expectation of £5.7bn as we use a more conservative cost of capital. Note that the additional GE contracts will add to the medium-to-longer term cashflows, although the cash associated with the GTF issues will provide a shorter-term outflow. Exhibit 7 provides a peer valuation for Melrose’s non-RRSP activities using a quoted aerospace peer group.

Exhibit 7: Aerospace ex RRSPs valuation

 

Currency

Share price

Market cap

EV/EBIT

EV/EBITDA

Local

£m

2024

2025

2024

2025

FACC

EUR

6.3

246

15.3

11.3

6.9

5.9

Magellan

CAD

8.02

267

8.3

5.8

6.1

4.7

MTU

EUR

213

9,815

13.8

12.1

10.0

9.0

Safran

EUR

146

52,280

16.0

13.2

12.1

10.4

Senior

GBP

176

740

14.6

11.2

7.8

6.7

Spirit

USD

21.0

1,760

11.7

6.7

6.3

4.8

Triumph

USD

9.1

556

9.7

8.7

8.0

7.2

Average

12.9

9.9

8.2

7.0

Melrose ex RRSPs (EBIT/EBITDA - £m)

360

450

485

580

Melrose ex RRSPs valuation (£m)

4,640

4,432

3,967

4,033

Source: Edison Investment Research

Combining these two valuations provides an overall valuation for the group. We have allowed for maximum consideration under the Melrose LTIP (which matures in May 2024), hence the higher number of shares used than currently in issue, but not taken into account the remaining share buyback, which we estimate will have a limited impact at current levels.

Exhibit 8: Overall valuation

£m

September 2023

December 2023

March 2024

Melrose ex RRSPs average of EV/EBIT and EV/EBITDA

3,740

3,960

4,314

RRSPs DCF valuation

5,300

5,300

5,300

Melrose net debt on demerger/year end

(553)

(687)

(572)

Melrose equity valuation

8,487

8,573

9,042

Number of shares in issue (m)

1,351

1,335

1,382

Value per Melrose share (p)

628

642

654

Source: Edison Investment Research

Exhibit 9: Financial summary

£m

2022

2023

2024e

2025e

Year to December

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

2,954

3,350

3,677

4,028

EBITDA

 

292

532

699

839

Operating profit (before amort. and excepts.)

147

390

537

669

Amortisation of acquired intangibles

(260)

(260)

(260)

(260)

Exceptionals

(157)

(73)

(50)

(10)

Reported operating profit

(270)

57

227

399

Net Interest

(58)

(59)

(80)

(94)

Exceptional financing costs

0

(6)

Profit Before Tax (norm)

 

89

331

456

575

Profit Before Tax (reported)

 

(328)

(8)

146

305

Reported tax

99

9

(29)

(61)

Profit After Tax (norm)

69

268

360

454

Profit After Tax (reported)

(229)

1

117

244

Minority interests

(5)

0

0

0

Discontinued operations

(80)

(1,020)

0

0

Net income (normalised)

64

268

360

454

Net income (reported)

(314)

(1,019)

117

244

Average Number of Shares Outstanding (m)

1,406

1,349

1,350

1,325

EPS - normalised (p)

 

4.1

19.5

26.7

34.3

EPS - normalised fully diluted (p)

 

4.1

19.1

26.7

34.2

EPS - basic reported (p)

 

(16.6)

(75.5)

8.7

18.4

Dividend (p)

2.3

5.0

6.7

9.3

Revenue growth (%)

8.5

16.6

15.6

11.4

Gross Margin (%)

14.3

35.0

36.0

37.0

EBITDA Margin (%)

9.9

15.9

19.0

20.8

Normalised Operating Margin

5.0

11.6

14.6

16.6

BALANCE SHEET

Fixed Assets

 

11,114

5,611

5,400

5,191

Intangible Assets

6,882

3,397

3,137

2,877

Tangible Assets

2,599

777

826

877

Investments & other

1,633

1,437

1,437

1,437

Current Assets

 

2,873

1,318

1,414

1,489

Stocks

1,025

510

550

581

Debtors

1,426

713

769

813

Cash & cash equivalents

355

58

58

58

Other

67

37

37

37

Current Liabilities

 

2,978

1,533

1,653

1,706

Creditors

2,347

1,179

1,271

1,344

Tax and social security

141

20

20

20

Short term borrowings

63

54

54

54

Other

427

280

308

288

Long Term Liabilities

 

3,841

1,829

1,476

1,046

Long term borrowings

1,433

576

1,130

1,027

Other long-term liabilities

2,408

1,253

347

19

Net Assets

 

7,168

3,567

3,684

3,928

Minority interests

39

0

0

0

Shareholders' equity

 

7,129

3,567

3,684

3,928

CASH FLOW

Operating Cash Flow

292

532

699

839

Working capital

(148)

(146)

(98)

(88)

Exceptional & other

(83)

(159)

(305)

(135)

Tax

(8)

17

(86)

(109)

Net operating cash flow

 

53

244

209

508

Capex

(31)

(93)

(211)

(221)

Acquisitions/disposals

(7)

0

0

0

Net interest

(82)

(65)

(70)

(84)

Equity financing

0

(93)

(407)

0

Dividends

(77)

(81)

(75)

(100)

Other

Net Cash Flow

(144)

(88)

(554)

103

Opening net debt/(cash)

 

343

487

572

1,126

Closing net debt/(cash)

 

487

572

1,126

1,023

Source: Melrose Industries, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Melrose Industries and prepared and issued by Edison, in consideration of a fee payable by Melrose Industries. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Melrose Industries and prepared and issued by Edison, in consideration of a fee payable by Melrose Industries. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

More on Melrose Industries

View All

Industrials

Melrose Industries — Steady climb

Industrials

Melrose Industries — Increasing trajectory

Latest from the Industrials sector

View All Industrials content

Research: Financials

CoinShares International — Bli utdelningsbetalare

CoinShares International (CS) avslutade sitt senaste räkenskapsår med justerad EBITDA för Q423 på 25,7 miljoner pund, vilket ökade vinsten för FY23 till 56,9 miljoner pund (det näst bästa resultatet i företagets historia). Bolaget inför nu en utdelningspolicy med målsättningen att utbetala 20–40 % av totalresultatet justerat för valutakursdifferenser. Vi beräknar att detta, baserat på resultatet för räkenskapsåret 2023 och nuvarande aktiekurs, innebär en god direktavkastning på ca 3,4–6,8 %. CS vill expandera till USA genom att utnyttja sin option att förvärva Valkyrie Funds (som har en bitcoin-ETF i USA i sitt erbjudande) och genom sin nyligen lanserade Hedge Fund Solutions-verksamhet.

Continue Reading

Subscribe to Edison

Get access to the very latest content matched to your personal investment style.

Sign up for free