Melrose improves aerospace sales as automotive revenues stay flat
Turnaround investor Melrose said today that it is trading in line with board expectations after buying engineering firm GKN in an £8.1bn hostile takeover earlier this year.
The FTSE 100 firm, which specialises in buying and improving underperforming businesses, told investors that GKN offers "an outstanding opportunity for value creation over the medium term".
Melrose reported "strong" revenue growth in its aerospace and powder metallurgy divisions in a trading update for the period between the start of July and the end of October, while sales in its automotive division were flat year on year.
Aerospace revenue was up six per cent compared to the previous year, while powder metallurgy grew nine per cent on the previous year.
"This good momentum gives confidence that the 14 per cent margin target can be achieved in the medium term," Melrose said.
Flat automotive sales, meanwhile, were presented as a relative success in the face of falling China demand that has hurt the revenues of car manufacturers like Jaguar Land Rover.
Shares climbed by nearly five per cent in the afternoon.
Christopher Miller, chairman of Melrose, said the group was on track to meet expectations for the full year.
“Melrose has a proven business model, which has been successful over many years and through several economic cycles. We are confident that there is an outstanding opportunity to make significant and lasting improvements to the performance of the GKN businesses," Miller said.