Melrose Industries PLC (LON:MRO) said its transformation of GKN continued “at pace”, with profit margins improving even though the growth of its aerospace arm continues to be offset by lower automotive sales.
In the third quarter of the year to 31 October, the FTSE 100-listed group reported 5% organic revenue growth for GKN Aerospace and “good margin improvement” compared to a year ago.
The automotive arm, Driveline, saw sales fall 5% on last year, though profits and margin were higher.
In the first half of the year, Aerospace had grown 7%, while Driveline was down 7%.
A strike by workers at General Motors in the US was a headwind for automotive and also led to revenue at the Powder Metallurgy business declining 13%. Without the strike, the performance would have been in line with management expectations, Melrose said.
During the quarter, the group agreed to acquire Forecast 3D, a 3D printing specialist with annual sales of US$19mln that is expected to complete by the year end and “further expand Powder Metallurgy's capabilities to become a leading global player in this fast growing and exciting market”.
Nortek Air & Security, one of the group’s ongoing turnarounds before it took over GKN around a year and a half ago, was said to be enjoying “improving year-on-year trends”, with modest sales growth and flat margins.
Group net debt was “in line” with internal expectations, with “significant investment and restructuring actions being funded to further improve performance and initial steps to reduce working capital in GKN being implemented as planned”.
Chairman Justin Dowley said: “Some macro conditions could be more helpful, but this has not stopped us continuing to transform the GKN businesses, delivering another trading period in line with expectations, and achieving better trends than seen in the first half of the year.”
Melrose shares rose 2% to 227.2p on Tuesday morning.
It was a "typical Melrose trading update in being short and in-line with expectations", said broker Peel Hunt.
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