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Melrose lifted as it reports strong revenue growth in Aerospace and Powder Metallurgy

Last updated: 10:05 13 Nov 2018 GMT, First published: 08:00 13 Nov 2018 GMT

Fighter jets
Despite mostly in line news, Melrose said US tariffs were materially affecting its Security and Ergotron business due to their factories in China

Melrose Industries PLC (LON:MRO) shares were lifted in mid-morning trading Tuesday after it issued an ‘in-line’ trading update for the four months to 31 October, with its Aerospace and Powder Metallurgy divisions delivering strong revenue growth.

The FTSE 100 turnaround specialist said that trading was in line with its expectations for 2018, with revenues in its Aerospace division up 6% on last year in the period while Powder Metallurgy was up 9%.

READ: Melrose appoints former Delphi Technologies boss Liam Butterworth to lead GKN units

The group said “good progress” had been made in Aerospace margin with an improved performance in North America, adding that improved margins in Powder Metallurgy gave it confidence that the 14% margin target could be achieved for the augment in the medium term.

In its Automotive division, which was acquired in a hostile takeover of UK firm GKN earlier in the year, Melrose said revenues had been flat during the period compared to last year, adding that margins had been lower but that “operational improvements identified on acquisition are achievable” and would positively impact performance from 2019 onwards.

The firm appointed Liam Butterworth, the former chief executive of Delphi Technologies (NYSE:DLPH), to head the automotive division in October as part of its improvement drive.

In its Nortek Air & Security (NAS) and other industrial segments, Melrose said NAS had achieved broadly flat sales compared to the year-ago period, with US tariffs materially affecting its Security and Ergotron business due to their factories in China, although the company added that these issues would not have a material effect on its overall performance.

The group said its net debt and cash generation were in line with expectations.

Christopher Miller, chairman of Melrose, said that despite certain end markets being “unpredictable”, the group was on track to meet its expectations for the year.

In a note to clients, analysts at City broker Peel Hunt said the companies improved margins in Aerospace gave it “good momentum” into 2019, adding that the better performance in the division was taking up the slack from the Auto segment and highlighting that “Melrose is not a pure play auto which is how its share price has been treated”.

Shares were up 3.6% at 170.9p.

--Adds share price and broker comment--

 

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