US acquisition proves resilient for Melrose

Manufacturing turnaround specialist, Melrose Industries has said it remains on course to meet full year expectations at its major US acquisition.

In a trading updater covering the period from July 1 to October 29, the Alcester-based group said revenue at Nortek was up 3% compared to the same period last year which, as expected, was a better performance than in the first half of the year.

The performance means that Nortek revenue for the first ten months of the year was up 1%, with continued margin improvement.

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

“The Air Management division has a positive market backdrop and the operational improvements available in the heating, ventilation and air conditioning (HVAC) business are significant,” said Melrose in the update.

“Security & Smart Technology has continued to deliver an excellent performance within a market place which is relatively flat and its margin could eventually exceed our original expectations should part of a lower margin contract come to its conclusion during 2018.

“Ergonomics continues to deliver excellent margins with future growth expected as we focus on new product development and the digital offering.”

However, Melrose warned the business could be impacted by strengthening headwinds, namely an adverse exchange rate movement on products imported from China and increased costs of materials.

Nevertheless, it said it remained confident of achieving its objectives for Nortek.

However, things are not so bright for the group’s other major interest, turbogenerator manufacturer Brush.

It said when it announced its interims in the summer that the market for Brush had been very difficult.

“This has continued to worsen, consistent with the most recent negative trading statements elsewhere in the sector. The current order intake by Brush would result in a low single-digit margin during 2018 but a full review of Brush is underway to improve its performance and shareholders will be updated in due course,” it said.