US operation generates strong H1 for turnaround specialist Melrose

Manufacturing turnaround specialist Melrose Industries has announced strong interims boosted by the performance of its major US acquisition.

Today marks the first anniversary of the Alcester-based group’s acquisition of Nortek in a £1.1bn deal and the group marked the occasion by announcing fresh investment into the business.

The company is also on the lookout for further acquisitions.

Last year Melrose sold its Elster operation for £3.3bn, having paid £1.8bn for it in 2012. Melrose went on to return £2.4bn to shareholders.

The subsequent acquisition of Rhode Island-based Nortek effectively trebled the size of the Melrose group. Nortek is described as a specialist in air management, security, home automation and ergonomic & productivity solutions.

Melrose said each Nortek business had responded well to the investments made so far, achieving a record underlying operating profit, which was 54% up on last year. The period also saw Nortek’s highest ever first half cash generation.

“We believe that there are substantial operational improvements still available and are working hard with the management teams to secure them,” said Melrose in its interim statement.

In the six months ended June 30, 2017 Melrose revenue was £1,085.6m (H1 2016: £104.7m), statutory operating profit was £57.9m (H1 2016: operating loss of £9.5m) and the statutory pre-tax profit was £47.8m (H1 2016: pre-tax loss of £9.2m).

Underlying operating profit in the period was £141.2m (H1 2016: £5.9m) and underlying pre-tax profit was £131.1m (H1 2016: £6.2m).

However, the outlook is not so bright for turbogenerator business, Brush.

It said the business was currently facing the toughest generator market conditions experienced under Melrose’s ownership and, accordingly, all aspects of the business were being reviewed.

Christopher Miller, chairman of Melrose Industries, said: “During the first ten months of our ownership, Nortek has delivered the fastest initial improvement in performance Melrose has ever achieved.

“More investment is being made in Nortek to drive further improvements and appropriate actions are being taken in Brush for the long term.

“We have also been busy exploring potential acquisitions over the past few months, and remain confident in our ability to find the right opportunity.”