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Melrose Industries PLC on Wednesday said it has made a strong start to 2023 and the company announced a departure from its industrial turnaround strategy, focusing on just aerospace instead for now. The firm also announced the prospect of consistent share buybacks as a restructuring of its aerospace offering progresses. Melrose shares shot up 5.6% to 448.25 pence each in London on Wednesday morning, the best FTSE 100 performer. The company said it traded materially ahead of expectations in the four months to April 30, with ‘significant growth in revenue, profit and margin being achieved’. Revenue was 19% higher year-on-year at constant currency, helped by a 28% improvement in its Engines divisions. The adjusted operating margin rose ‘substantially’ to 10%. The figures remove its recently demerged divisions from the comparative period. In April, Melrose Industries completed the demerger of the GKN Automotive, GKN Powder Metallurgy and GKN Hydrogen businesses from the company into Dowlais Group PLC. Dowlais is now a FTSE 250 constituent. Looking ahead to the rest of 2023, Melrose expects revenue between £3.35 billion and £3.45 billion. The higher end of that range would top company-compiled consensus of £3.4 billion. Melrose had reported revenue of £7.54 billion in 2022, though that included Dowlais. Adjusted operating profit between £340 million and £360 million is expected, before head office costs. It expects adjusted earnings before interest, tax, depreciation and amortisation between £495 million and £515 million, also before head office costs. Melrose expects PLC head office costs to reduce to £30 million from £45 million. Traditionally an industrial turnaround specialist, Melrose said it will focus on Aerospace for now, instead of its customary ‘buy, improve, sell’ strategy. ‘For the next 12 months the focus is to create further substantial value for shareholders by maximising the embedded quality and potential of Aerospace,’ it explained. ‘Beyond that, Melrose will continue as a pureplay aerospace company. Consequently, the board will not seek to do another acquisition of an unrelated industrial business or, in the near term, a material aerospace business. As the Aerospace restructuring completes over the next 12 months, this strategy will give Melrose the ability to consistently buy back a proportion of its shares each year thereafter.’ Copyright 2023 Alliance News Ltd. All Rights Reserved.
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