Melrose Industries’ half-year trading statement reiterates the tough climate the company is currently operating in.
The engineering group saw its share price fall markedly in mid-morning trading, down nearly 7% to 200.50.
The company - which specialises in buying underperforming manufacturing operations and improving the businesses - ,said that revenue for its subsidiary Nortek was up 3% compared to the same period last year which, as expected, is a better performance than in the first half of the year.
This means that Nortek revenue for the first ten months of the year is up 1% and margin improvement continues to be seen. Melrose is on track to achieve a performance consistent with expectations for this year and cash generation remains strong.
The Air Management division has a positive market backdrop and the operational improvements available in the heating, ventilation and air conditioning (HVAC) business are significant.
Security & Smart Technology has continued to deliver a decent performance within a market place which is relatively flat and its margin could eventually exceed the group’s original expectations should part of a lower margin contract come to its conclusion during 2018.
Ergonomics continues to deliver good margins with future growth expected as we focus on new product development and the digital offering.
However, despite some positive numbers the Group admitted there were significant headwinds facing Nortek in 2018, namely an adverse exchange rate movement on products imported from China and increased costs of materials.
Difficulties continued for the group’s Brush business, which manufactures of electricity generating equipment for the power generation, industrial, oil & gas and offshore sectors
As announced in its interim results the market for Brush has been very difficult. According to the Melrose board, this has continued to worsen, consistent with the most recent negative trading statements elsewhere in the sector.
The current order intake by Brush would result in a low single-digit margin during 2018 but, as stated at the time of the interim results, a full review of Brush is underway to improve its performance and the company insisted shareholders would be updated in due course.