Tough love pays dividends for Melrose Industries

Brush Turbogenerators

WARWICKSHIRE manufacturing turnaround specialist, Melrose Industries, has implemented a major shake-up of its latest acquisition; closing down its head office and axing loss-making operations.

The Alcester-based firm invested £1.1bn in the acquisition of Norteck in the summer. The deal was part of a long-term strategy to fill the gap in the group’s portfolio left by the £3.3bn sale of former asset Elster last year.

Rhode Island-based Nortek is a leading diversified global manufacturer of innovative air management, security, home automation and ergonomic and productivity solutions.

Prior to acquisition, its common stock traded on the NASDAQ Global Market and for the 12 months ended December 31, 2015, it reported revenue and headline operating profit of $2,526.1m and $220.1m respectively, with North America representing 90% of 2015 revenue.

In a trading update, Melrose said: “The first two months of ownership of Nortek have been encouraging with many actions being taken in a short space of time.”

It said it was confident that the business was now well positioned to achieve pre-acquisition assumptions, supported by management changes and operational improvements.

“The inherited strategies of each of the businesses have been reviewed with the level of investment increasing and, where necessary, the focus of management changing,” it added.

Measures already implemented include the closure of Nortek’s head office, with resultant cost savings, the appointment of a new CEO to run the combined Heating, Ventilation & Air Conditioning (HVAC) businesses, the closure of loss-making segments within the HVAC operation, a rapid improvement of the loss-making Audio, Visual & Control business and the elimination of unprofitable products.

“The board is pleased with the progress made to date and is confident of creating significant shareholder value from this acquisition,” it added.
 
Melrose said it was also expecting the second half to be better for another of its portfolio firms, Brush Turbogenerators.

Brush is the world’s largest independent manufacturer of electricity generating equipment for the power generation, industrial, oil & gas and offshore sectors.

However, the road to improved performance has also required the firm to implement some tough measures, including reducing the size of the workforce by a quarter since the start of 2015.

“The end markets for Brush remain tough for both market and customer reasons with a prolonged challenging sales environment. To react to this, the workforce has been reduced by around a quarter, realigning the cost base accordingly,” it said.
 

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