Elster drives margin growth at Melrose in H1
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Melrose Industries
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16:49 18/04/24
- Revenues fall 11% due to stronger pound
- Elster helps profits beat forecasts
- Dividend raised to 2.8p from 2.75p
Despite a stronger pound weighing on its top line, industrial investment firm Melrose beat forecasts with its first-half profits, helped by a strong performance from its largest division, Elster.
The company, which invests and turns around underperforming manufacturing businesses, reported revenues of £780.9m in the six months to 30 June, down 11% year-on-year due to the strengthening of sterling against many foreign currencies.
On a constant currency basis, revenues were just 5% lower than the first half of 2013.
However, operating profits totalled £128.5m for the period, down from £132.9m previously, but ahead of Investec's £120.2m prediction, as decent margins at Elster helped group operating margins rise 1.3 percentage points (ppts) over the year to 16.5%.
Constant-currency headline diluted earnings per share rose 11% to 7.3p, ahead of the 6.6p estimate.
Elster, the gas, electricity and water metering division accounts for nearly two-thirds of group sales, saw operating profits increase by 10% at constant currency, as operating profit margins rose 2.9ppts to 18.9%.
This helped to offset falling margins at the FKI division, which comprises the Brush Turbogenerators business and lifting unit Bridon, due to weakness in specific market areas, principally mining.
"With profits up almost 50% since acquisition, the investment and operational improvements in Elster continue to create shareholder value on a scale which has surpassed our expectations at acquisition," said Melrose's chairman Christopher Miller.
"Elster is on track to being our most successful acquisition to date."
He said that Melrose's search for its next acquisition "continues with patience and rigour".
The company declared an interim dividend of 2.8p, up from 2.75p previously.
The stock was 0.3% higher at 279.6p by 08:35 on Thursday.
BC