Melrose Industries gains altitude as it expects to make big cash savings this quarter


Melrose Industries gains altitude as it expects to make big cash savings this quarter

Melrose Industries PLC’s (LON:MRO) said sales in the first four months of 2020 were down roughly 20% year-on-year as the coronavirus pandemic hit its business.

The holding company, which owns the automotive and aerospace engineer GKN, said trading had been in line with expectations this year up until about the middle of March.

The disruption to activity in industries that Melrose serves, particularly the aerospace industry, prompted the company to focus even more on cash management than it normally does and it told investors today that capital expenditure and trade working capital actions alone are forecast to deliver about £200mln of cash savings in the second quarter of this year.

Factories in Melrose’s Aerospace division have largely remained open. Defence-related factories make up about 30% of last year’s sales and are expected to be relatively unaffected by the COVID-19 virus.

Melrose acknowledged there will be a detrimental effect on the aerospace industry arising from current events, but the board believes there is “substantial opportunity to continue to improve this market-leading business and position it well for the future”.

Sales in the first four months of this year from the Automotive division were down 8% year-on-year.

Meanwhile, the Automotive and Powder Metallurgy divisions combined saw a 31% sales decline from the same period of 2019 while the Nortek Air Management and Other Industrial divisions saw their sales slide 12%.

“During the next few months we will put in place plans to position our businesses to achieve their future potential in different market conditions,” declared Simon Parkham, the chief executive officer of Melrose.

“Melrose has a track record of managing its businesses successfully in all market environments and crucially our recent cash generation performance shows we have been able to maintain the strength of the balance sheet to position the group’s businesses in the best way for the future,” he added.

Shares in Melrose were up 2.8% at 100.95p in a flat market on Thursday morning.

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