Melrose Industries PLC Trading Statement (6777T)
22 Julio 2020 - 01:00AM
UK Regulatory
TIDMMRO
RNS Number : 6777T
Melrose Industries PLC
22 July 2020
22 July 2020
MELROSE INDUSTRIES PLC
Trading Update
Melrose Industries PLC ("Melrose" or the "Group") publishes the
following trading update for the half year period ended 30 June
2020 (the "Period") prior to the publication of its interim
results. All numbers are calculated at constant currency.
Overview
The Period covered by the trading update has been extraordinary.
For part of this Period the Automotive and Powder Metallurgy
businesses had factories that were largely closed in Europe and the
Americas, and the Aerospace and Nortek businesses had factories
which were largely open but with hugely reduced requirements. As a
consequence, your Board cancelled the final dividend due in May
2020, negotiated waivers for its EBITDA to net debt covenant for
June and December 2020, and focused the Group on cash generation.
Your Board is grateful for the swift and unanimous support of its
lending banks in renegotiating these banking arrangements which has
been a significant benefit to Melrose stakeholders.
As a result of this cash focus, the Group has generated c.GBP200
million of free cash flow, before restructuring costs and the
acquisition of Forecast 3D in January 2020, resulting in net debt,
at constant currency, reducing by c.GBP90 million in the Period.
Consequently, the committed bank headroom has increased to over
GBP1.1 billion as at 30 June 2020. Additional to this headroom the
Group has cash in hand of over GBP300 million. The Group therefore
beat its target of being cash neutral in what was a hugely
difficult trading environment and your Board is pleased with this
achievement.
It is natural that, as the businesses recover from the
consequences of closed factories, some working capital requirements
will need to increase as factories re-open. Importantly, there is
still the opportunity to reduce inventories in the Group by over
GBP150 million to significantly mitigate this, which is in addition
to the c.GBP200 million of reduction in inventory and capital
expenditure achieved since March 2020.
It is also necessary to adapt the businesses for the new
economic environment, which means that there has to be an even
stronger focus on cost reduction throughout the Group with some
inevitable impact on employee numbers. Your Board estimates that
such cost reduction measures taken this year will have a net
beneficial contribution to the Group of c.GBP100 million in 2021
after assuming the scheduled withdrawal of worldwide government
support schemes and furlough.
Trading update
In the Period Group revenue declined by 27% which was reflective
of trading in line with expectations until mid-March 2020 followed
by a steep decline in the second quarter. The focus on cash and
reducing working capital has some detrimental effect on
profitability for the year. The Group was loss-making in the second
quarter of this year, but rebounded to be breakeven at the adjusted
operating profit level in the month of June as recovery started to
take place. This means Melrose is likely to make a small adjusted
operating profit in the Period. Bearing in mind the focus on cash
generation, your Board regards this as a significant
achievement.
In line with the industry, sales in Aerospace for the Period
reduced by approximately 18% and are not expected to recover in the
second half of the year. Overall it is anticipated that sales for
the year are likely to reduce by approximately 25-30% year-on-year
and for the business to broadly breakeven. Therefore, a substantial
reduction of the Aerospace cost structure is underway. This will
significantly improve this business's performance in 2021 without
relying on sales growth from the level anticipated this year. This
is a world leading business and as such is well positioned in its
market to adjust to the demands of the new aerospace
environment.
The Automotive and Powder Metallurgy businesses saw very similar
trends to each other in the Period with a sharp decline in the
second quarter due to many of their factories being shut and sales
in the Period subsequently being down 36%. However, these
businesses are also now seeing recovery. With COVID-19 cases
currently rising in parts of the world and an unknown effect of
customer restocking it cannot be certain these trends will continue
at their current strength, but at present trading in China is ahead
of last year (and has been for a couple of months), trading in the
US is forecast over the summer to be within 10% of last year and
there are some signs of improving European demand. All of this
currently gives hope for a faster recovery than was sometimes
feared would be the case though it is too early to be certain of
this.
Existing travel restrictions mean that the Automotive Investor
Day in New York, intended to be held in October 2020, will be
rescheduled.
Nortek Air Management is performing well, and as a result, sales
in the Period were only down 7%. The exciting StatePoint
technology, aimed at improving the energy and water usage in data
centres around the world, is gaining significant traction, with
forecast sales this year of over $100 million. The business is
receiving significant interest in its products from a number of
data centre providers. Melrose announced on 5 March 2020 that it
had appointed advisers to explore the strategic options for Nortek
Air Management: this review was suspended later in March this year.
Whilst there remains uncertainty on timing, it is the intention to
revisit these options early in 2021. In the meantime, there is
confidence that the improvements in these businesses this year
(StatePoint and elsewhere) have further enhanced the quality of
this division.
The Other Industrial businesses are in various end markets
impacted by COVID-19 to variable extents. Brush is benefiting from
the significant restructuring projects which it completed in 2019
and Ergotron has seen strong demand for its health sector
products.
While the COVID-19 crisis has been challenging for all our
businesses, the Group has sought to protect investment in R&D
and continue to develop world leading technologies. Aerospace is
investing in ground-breaking technologies for both electric and
hydrogen powered aircraft. Automotive pressed ahead with its
investment in e-Drive auto systems and recently produced its
millionth e-Drive unit. Powder Metallurgy has continued to develop
its 3D printing capability including the acquisition of Forecast
3D. Nortek Air Management, as stated above, is also continuing to
develop its revolutionary StatePoint technology. Further
development of these and other exciting projects are key to the
successful development of the Group.
While we are encouraged by the strong cash performance in the
Period, your Board does not consider it appropriate to pay an
interim dividend to shareholders in 2020. The Company will publish
its full interim results on 3 September 2020.
Simon Peckham, CEO of Melrose Industries PLC, said:
"This has been an extraordinary period which has needed our
management teams and employees to carry out difficult actions with
speed and determination. As a result we have generated GBP200
million of free cash flow and started to adapt our world leading
businesses to take advantage of the market and acquisition
opportunities the future will bring. For this year the focus is on
cost control and cash generation, but we have protected investment
in innovation for the future. Whilst timetables will have been
affected, we remain confident that our businesses will adapt and
produce good returns for our shareholders."
-ends-
Enquiries:
Montfort Communications: Nick Miles
+44 (0) 20 3514 0897
+44 (0) 7973 130 669
miles@montfort.london
Charlotte McMullen
+44 (0) 20 3514 0897
+44 (0) 7921 881 800
mcmullen@montfort.london
Melrose Investor Relations: +44 (0) 7974 974690
ir@melroseplc.net
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
TSTQFLFLBDLFBBX
(END) Dow Jones Newswires
July 22, 2020 02:00 ET (06:00 GMT)
Melrose Industries (LSE:MRO)
Gráfica de Acción Histórica
De Feb 2024 a Mar 2024
Melrose Industries (LSE:MRO)
Gráfica de Acción Histórica
De Mar 2023 a Mar 2024