Melrose Industries PLC Trading Statement (9802N)
05 October 2021 - 5:00PM
UK Regulatory
TIDMMRO
RNS Number : 9802N
Melrose Industries PLC
05 October 2021
5 October 2021
MELROSE INDUSTRIES PLC
Trading Update
Melrose Industries PLC ("Melrose" or the "Group") publishes the
following trading update for the period 1 July 2021 to 30 September
2021 (the "Period"). All numbers are calculated at constant
currency.
Trading update
Melrose is seeing improvement in the Aerospace end markets with
revenue in the Period being 16%(1) higher than the same period last
year. The Aerospace business continues to improve its performance
through restructuring, and we expect the pace of this to further
pick up during the second half.
As previously discussed, there are well publicised supply
constraints in the automotive industry, and this naturally affects
the performance of the Automotive and Powder Metallurgy divisions.
At present the timing and duration of these constraints is
uncertain, but recently the consensus view is that they have
lengthened. There are a number of scenarios possible, but it is
likely these are below previous expectations.
The underlying demand from Automotive customers is strong, with
the near-term schedules from customers being above 2019
pre-COVID-19 levels. Those schedules are, however, then being
heavily constrained by the customers due to their supply chain
issues caused by the global shortage of semi-conductors. This is
best illustrated by 'in month cancellations' from customers rising
from a normal rate of c.1% each month experienced in Q1 this year
to a current rate of approximately 20% to 25%. A similar theme is
impacting Powder Metallurgy. These industry supply issues are very
difficult to plan for, or predict, and both businesses are working
with their customers to best manage this challenging situation.
The Automotive and Powder Metallurgy divisions would
nevertheless both still be able to deliver a full year margin of
approximately twice that achieved last year should the supply for
light vehicle production this year more closely resemble 2020
COVID-19 levels (i.e. approximately 76 million vehicles), as some
industry bodies now assume. This shows the clear benefit from the
restructuring projects being delivered especially as there is much
less governmental help for the industry this year compared to
last.
Melrose is confident that the scale of the impact on
profitability from any revenue adjustment is in line with previous
guidance given on margin drop-through, further underlining the good
progress being made with the restructuring of these businesses.
Both the Automotive and Powder Metallurgy businesses are fully on
track to achieve their margin targets once supply constraints are
resolved. As an inflationary environment returns, all of the
businesses are focussed on the recovery of their costs and will
take whatever actions are necessary to do so.
Cash generation in the year is expected to be managed well, with
all businesses showing positive cash flows, despite the supply
constraints in the automotive industry, and with continued
investment in new technology and restructuring. The disposal of
Nortek Control for $285 million has been successfully
completed.
As stated in the interim results, the Board will review a
capital return next March in the light of market conditions at the
time.
Simon Peckham, Chief Executive of Melrose Industries PLC,
said:
" All internal management actions are on track, and many are
ahead of plan. We are very pleased with the internal progress being
made. Tightened supply of semi-conductors to the automotive
industry are frustrating and difficult to plan for, but whilst they
affect current trading, they don't impact long-term value,
particularly as cash is well controlled and debt reduced. We have
made our businesses better, more flexible and resilient to deal
with near term headwinds, and all our businesses are on track to
achieve their margin targets assuming partial end market recoveries
.
1. Adjusted for the disposals of Fokker Services and Fokker
Techniek, completed in H1 2021
-ends-
Enquiries:
Montfort Communications: Nick Miles
+44 (0) 20 3514 0897
+44 (0) 7739 701 634
miles@montfort.london
Charlotte McMullen
+44 (0) 20 3514 0897
+44 (0) 7921 881 800
mcmullen@montfort.london
Melrose Investor Relations: Chris Dyett
+44 (0) 7974 974690
ir@melroseplc.net
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