Melrose Industries PLC Trading Statement (1884M)
07 Mayo 2020 - 1:00AM
UK Regulatory
TIDMMRO
RNS Number : 1884M
Melrose Industries PLC
07 May 2020
7 May 2020
MELROSE INDUSTRIES PLC
AGM Trading Statement
Melrose Industries PLC ("Melrose" or the "Group") publishes the
following trading update for the four months from 1 January 2020 to
30 April 2020 (the "Period") ahead of its Annual General Meeting
taking place later today. All numbers are calculated at constant
currency.
Trading update
The Group traded in line with expectations from 1 January 2020
until mid-March 2020, at which point the worldwide impact from
COVID-19 caused significant disruption, resulting in many factories
being shut or remaining only partially open. As a result of the
effects from COVID-19, Group sales in the Period were down
approximately 20% versus the same period last year.
As previously stated in our announcement dated 30 March 2020,
due to the impact of COVID-19, Melrose is not in a position to give
any trading guidance for the year as conditions remain too
unpredictable to forecast. In these challenging times, the health
and safety of our employees is clearly of vital importance and we
are following government guidance on hygiene and social distancing
protocols, as well as coordinating the sourcing of protective
equipment globally to ensure no disruptions.
Robust cash management remains the top commercial priority of
the Group this year with comprehensive cash preservation actions
being successfully implemented in each business, including a focus
on reducing working capital to match reduced sales, cutting or
delaying both capital expenditure and longer-term restructuring
projects and also reducing costs. Capital expenditure and trade
working capital actions alone are forecast to deliver approximately
GBP200 million of cash savings in the second quarter.
Melrose started the year with approximately GBP1 billion of
committed bank facility headroom and due to the excellent results
of the cash management procedures put into place, this amount of
headroom also exists at the end of April 2020. On the basis of
current Group forecasts this is not expected to materially change
at the half year. A combination of salary sacrifices by Group
employees and furloughing (where possible with the benefit of the
relevant government schemes) has also helped to reduce costs.
Additionally, cash preservation has been significantly assisted by
the cancellation of the 2019 final dividend to shareholders.
Aerospace
Factories in our Aerospace division have largely remained open.
Defence related factories make up approximately 30% of last year's
sales and are expected to be relatively unaffected by the COVID-19
virus.
In relation to civil aerospace, five factories within the
Aerospace division are currently closed (representing 5% of the
division's sales in 2019) and the rest are operating at reduced
capacity.
Actions have been taken to reduce the cost base of this division
and detailed plans are being drawn up to position the business
appropriately for future demand. Further information on this will
be disclosed in the 2020 interim announcement. Whilst clearly there
will be a detrimental effect on the aerospace industry arising from
current events, the Board believes there is substantial opportunity
to continue to improve this market leading business and position it
well for the future.
The net result of the above trading conditions in the Period was
a sales decline of 8% versus the same period last year.
Automotive and Powder Metallurgy
The Automotive and Powder Metallurgy businesses have seen
similar trading patterns to each other with their factories in
Europe and North America largely being shut since mid-March.
Factories closed in whole or part during this period represented
approximately 88% of the 2019 sales. All our factories in China
have now been open for several weeks and we are seeing encouraging
signs of a recovery in demand. There is also a steady process of
factories being reopened in Europe and North America, albeit a
gradual return with productivity affected by social distancing
measures.
Again, management has taken significant actions to reduce the
cost base of these businesses, and plans are being drawn up to
position for the future. In both cases these businesses enjoy large
market shares and strong customer relationships and the Board
believes significant opportunity exists to improve their
performance.
The net result of the above trading conditions in the Period was
that these two divisions combined had a sales decline of 31% versus
the same period last year.
Nortek Air Management and Other Industrial
The economic impact of the virus on the Nortek Air Management
and Other Industrial businesses has varied but overall it has been
less pronounced than within the other divisions. HVAC has seen
StatePoint and data centre sales continue their extremely
encouraging development. Ergotron has coped well with significant
growth in its health and education sectors. AQH and Security have
been more affected by COVID-19.
The net result of the above trading conditions in the Period was
that these two divisions combined had a sales decline of 12% versus
the same period last year.
Financial position
Melrose debt facilities are well balanced and there are no
short-term maturities. Prudently, the Group took action at the end
of last year to extend the maturity of the c.GBP0.9 billion
committed term loan, solely at Melrose's option, from April 2021 to
April 2024. The Group's committed c.GBP3.2 billion revolving credit
facility is repayable in January 2023. The leverage covenant (net
debt to EBITDA) on the Group's committed banking facilities has
been waived for the June 2020 and December 2020 testing periods. In
addition to these committed banking lines the Group has two bonds:
a GBP450 million bond maturing in September 2022; and a GBP300
million bond maturing in May 2032, both of which have no financial
covenants.
As stated above, the headroom on the committed bank facilities
at the end of April remains largely unchanged since the start of
the year, at c.GBP1 billion, and is not expected to change
materially over the remainder of the first half of 2020.
The Board
In the circumstances the Board has asked David Roper to delay
his retirement as Executive Vice Chairman and we are pleased to
inform shareholders that he has agreed to do so.
AGM
In light of current government guidance prohibiting gatherings
of more than two people, your Board has also upgraded the
attendance restrictions for our AGM and so regretfully are unable
to allow attendees other than the two employee shareholders
necessary for a quorum.
Simon Peckham, CEO of Melrose Industries PLC, said:
"Our divisional management teams and head office employees have
responded brilliantly to these unparalleled circumstances, which
are likely to remain challenging for a while. During the next few
months we will put in place plans to position our businesses to
achieve their future potential in different market conditions.
Melrose has a track record of managing its businesses successfully
in all market environments and crucially our recent cash generation
performance shows we have been able to maintain the strength of the
balance sheet to position the Group's businesses in the best way
for the future."
-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
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END
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