Cash rolling in at Melrose

10th Mar 2010 07:26

The acquisition of FKI is working out better than expected for engineering conglomerate Melrose, which saw headline profits rise by almost two-thirds in 2009.Revenue in 2009 advanced to £1,298.5m from £895.3m in 2008, while headline profit before tax jumped to £118.6m from £73.1m the year before. ‘As reported’ profit before tax was £82m, compared to £23.5m in 2008.‘Headline’ figures refers to results that are calculated before exceptional costs, exceptional income and intangible asset amortisation.The FKI acquisition increased the size of the group six-fold and entailed the issue of a large number of shares. As a result, basic headline earnings per share (EPS) only rose from 16.1p to 16.6p, or 16.3p on a fully diluted basis. ‘As reported’ EPS jumped to 11p from 4.1p.Since the acquisition of FKI on 1 July 2008 £245m of cash has been generated from trading, contributing towards a reduction in a halving (at constant exchange rates) of net debt since the acquisition to £237m.Actual net debt at the end of 2009 was £321.7m, down from £543.1m at the end of 2008.The company is rushing through a second interim dividend of 4.8p in lieu of a final dividend ahead of the UK government’s tax hike for higher rate tax payers. Last year the final dividend was 4.25p. Total dividends for 2009 are up 10% on 2008 levels at 7.7p.‘Across the group, sales are now beginning to increase and order books are reviving. For the moment it appears recovery which has been noticeable for several months in the East, may be on the way in the West - although caution must be the watchword until this becomes established,’ said Christopher Miller, chairman of Melrose.‘Government debt reduction programmes which need to be carried out in many countries have not yet been implemented and it is very difficult to prejudge the timing and the effects of these,’ Miller added.Chief executive officer David Roper also saw signs of improvement in trading. ‘In our early cycle businesses this upturn has already been reflected in higher sales, whilst in our later cycle businesses order books have been improving, which will translate into higher sales as appropriate. On the back of operational efficiency gains in our manufacturing plants and lower costs, this should feed through strongly into better performance,’ Roper said.