Melrose Industries - Final Results

Melrose Industries PLC today announces its audited results for the year ended 31 December 2018. This includes 8 months of contribution from GKN since acquisition. An additional measure to guide ongoing performance, the 2018 unaudited, annualised adjusted1 numbers, is also shown below.




§ The results for 2018 are ahead of the Board's previous expectations

§ This outperformance has been achieved before including a £63 million positive impact from the required IFRS accounting treatment for loss-making contracts. Resolution of these loss-making positions offers significant potential for further performance improvement

§ Adjusted1 diluted earnings per share were up 36% on last year, with a proposed final dividend of 3.05 pence per share which is 9% up on last year, giving a full year dividend of 4.6 pence per share, up 10%

§ Total free cash flow from trading was £196 million. This was after all costs including restructuring, special pension contributions and tax

§ The net debt to EBITDA1 leverage ratio has reduced to 2.3x, ahead of the previous guidance of 2.5x

§ North America Aerostructures is approaching operational break-even, on a run rate basis, and relationships with key aerospace customers have been much improved

§ In Automotive, present indications are consistent with a slowdown, but this is not currently expected to cause a major impact on 2019 profitability.  Improvement actions are underway to ensure the successful long-term development of the business

§ Nortek Group adjusted1 operating margins have increased from 8.7% at acquisition to 14.7% in 2018 with the potential for further improvement

§ The GKN UK defined benefit pension accounting deficit has reduced from £691 million to £588 million since December 2017, and an independent Chairman of the trustees has been appointed

§ An investor event for Aerospace and Automotive will be held on 3 April 2019 in London


Justin Dowley, Chairman of Melrose Industries PLC, today said: 


"This has been a transformational year for Melrose and we are delighted to announce, on an annualised adjusted basis, an operating profit of over one billion pounds. The former GKN businesses are proving their potential to offer the outstanding opportunities we expected and much has already been achieved in the short period of ownership. Despite the current economically uncertain environment, we have every confidence that we will be able to continue to unlock the substantial shareholder value from the former GKN businesses and further improve Nortek."

The audited results













Operating (loss)/profit



(Loss)/profit before tax




Diluted earnings per share




  • The statutory and adjusted1results include GKN for the eight months since acquisition on 19 April 2018
  • The 2018 adjusted1operating profit was £847 million; excluding the positive impact from the required IFRS accounting for loss-making contracts in GKN it would have been £784 million
  • The statutory loss before tax of £550 million arose primarily due to significant acquisition related items, most of which arise from GKN


The unaudited annualised adjusted1 results - including 12 months of GKN



Annualised adjusted1results including 12 months of GKN





Operating profit


Profit before tax



Diluted earnings per share



  • The annualised adjusted1results include a full 12 months of GKN assuming it was acquired on 1 January 2018, and give a meaningful measure of annualised performance to guide ongoing results
  • The annualised adjusted1operating profit was £1,095 million; excluding the positive impact from the required IFRS accounting for loss-making contracts in GKN it would have been £1,002 million
  • The annualised adjusted1diluted earnings per share were 13.8 pence, up 41% on Melrose adjusted1 diluted earnings per share last year



I am pleased to report on our 16th set of annual results since flotation in 2003.




The past year has been transformational for Melrose in a number of ways.  We achieved strong results, with statutory revenue for the Melrose Group of £8,605 million (2017: £2,092 million) and, despite declaring a statutory operating loss of £392 million (2017: £7 million) primarily as a result of the required accounting for the GKN acquisition, our adjusted[1] operating profit was £847 million (2017: £279 million), and adjusted diluted earnings per share were up 36% on last year.


This performance builds on the success of our public takeover of GKN plc. Following the bid, we immediately set about initiating the changes we believe are necessary to unlock the full potential of the GKN businesses. These changes are already having a positive effect as shown in our 2018 preliminary results announced today. 


We continue to see many opportunities to improve GKN and have found enthusiastic and energised employees within the GKN businesses who are keen on partnering with us to achieve these ambitions.  While it is still early days, I would like to thank them all for their hard work already and we look forward to continuing to work with them to deliver the exciting opportunity before us. 


Although much of the public attention has been on the GKN businesses, we have continued to build and improve our existing businesses in 2018. Nortek Global HVAC ('HVAC') is making good progress with its industry leading StatePoint® technology, backed by the significant investment required to partner with some of the biggest global names in the data centre sector.  Although facing challenges elsewhere, Security & Smart Technology ('SST') made an important step in securing the acquisition of IntelliVision Inc., enabling the application of video analytics across its product range.  While Brush has delivered its restructuring in accordance with its plans and is well set for the future, their generator services market has faced further declines.


Further details of these results are contained in the Chief Executive's Report and Finance Director's Review and I would like to thank all employees for their efforts in helping to produce this strong performance.




The Board proposes to pay a final dividend of 3.05 pence per share (2017: 2.8 pence) making a total of 4.6 pence for the year (2017: 4.2 pence), an increase of 10% in line with its progressive annual dividend policy. This will be paid on 20 May 2019 to those shareholders on the register at 5 April 2019, subject to approval at the Annual General Meeting (AGM) on 9 May 2019.




There were wider macro challenges for some of our businesses in 2018 and we see these continuing into this year.  However, with culture change based on accountability, backed by significant investment and a more disciplined strategic focus being applied to improve all aspects of our businesses, we remain confident of further success as we enter 2019.