Melrose Industries PLC Record investment in aerospace technology and eDrive development

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Melrose Industries PLC (LON:MRO) today announced its interim results for the six months ended 30 June 2019.

Highlights

	Adjusted¹ results		Statutory results
Continuing operations	2019	2018	2019	2018
	£m	£m	£m	£m
Revenue	6,002	2,971	5,700	2,847
Operating profit/(loss)	539	284	-11	-325
Profit/(loss) before tax	429	244	-128	-372
Profit/(loss) after tax	330	188	-150	-330

Diluted earnings per share	6.7p	6.0p	(3.1)p	(10.6)p

Group

Melrose is trading in line with expectations for 2019, with the three main divisions of GKN on track to achieve previously announced targets

Adjusted¹ operating profit was £539 million, which excluding the uplift from loss-making contracts was £494 million. The statutory operating loss was £11 million; of the £550 million adjusting items, only £79 million are cash

Net debt leverage at 2.3x EBITDA is better than expectations due to stronger cash generation

Adjusted free cash inflow² from continuing operations of £256 million

A new target to improve GKN’s working capital efficiency, releasing additional future free cash of £400 million within our ownership period

An interim dividend of 1.7 pence per share (2018: 1.55 pence) is declared, up 10%

Divisions

Aerospace performance is significantly better than prior year period; adjusted¹ operating profit growth³ of 37% and adjusted¹ operating margin improvement of 2.0 percentage points

Aerospace increasing to 34% of Group adjusted¹ profits, becoming the largest division and profit driver in Melrose

Record year of investment in Aerospace technology and a major announcement to create the ‘One GKN Aerospace’ organisation, to improve performance further

Automotive and Powder Metallurgy are maintaining profit well in an automotive industry downturn, due to decisive cost reductions

Significant investment made into class leading eDrive technology

Nortek businesses’ adjusted¹ operating profit has grown by approximately 40% during our ownership

Nortek Air & Security has strong fundamentals, HVAC has signed a significant new contract for its industry leading new proprietary StatePoint Technology®

Security & Smart Technology is challenged by US tariffs and market headwinds

Many operational improvement programmes and capital investment projects are underway to help improve performance further, while good progress is being made on resolving the GKN loss-making contracts

Justin Dowley, Chairman of Melrose Industries PLC, today said:
“These results show the initial fruits of the ‘improve’ stage of Melrose’s ownership of GKN and, with the overall GKN margin increasing positively, we are excited about what is possible. The performance is in line with expectations and leverage is better than expected. At the same time, this has been a year of record investment in Aerospace technology and substantial eDrive development. The Melrose Board is confident that our businesses will deliver significant upside for shareholders.”

^{1. Considered by the Board to be a key measure of performance. The adjusted results are described in the glossary to the Interim Financial Statements}

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^{2. Adjusted free cash inflow excludes the one-off pension contributions, restructuring spend and cash used in discontinued operations}

^{3. Growth is calculated at constant currency against 2018 results, excluding the impact of loss-making contracts in both periods for consistency}