Melrose Industries PLC, UK, has announced its interim results for the six months ended June 30, 2020. The group, which includes GKN Powder Metallurgy, GKN Aerospace and GKN Automotive, reported an adjusted operating profit of £56 million in the period, compared to £541 million for the first half 2019.
The group made a statutory operating loss of £581 million. However, it was reported that trading over the summer months had been at the higher end of the board’s expectations, particularly in automotive and key Nortek Air Management markets.
Cash generation was said to have been strong in the period with £213 million of adjusted free cash flow reported. In addition to the significant working capital inflow in the first half of the year, the group expects a further £300 million of efficiency improvements in working capital to be delivered.
Automotive and Powder Metallurgy sales were said to have been down 36% in the period, but Melrose stated that it saw a a number of encouraging signs of recovery in these segments, with recent trading in China ahead of 2019’s results.
North America was also said to be improving quickly, and there were some positive signs in Europe, although the speed and shape of improvements remains uncertain.
Restructuring projects were said to be underway at Melrose that will improve the group’s trading performance by over £100 million next year. In particular, substantial margin improvement opportunities are said to be available across the GKN businesses.
The group reported that its investment in advanced and energy-efficient technologies has continued throughout the period. Among those technologies, it continues to invest in its Additive Manufacturing capabilities.
Justin Dowley, chairman of Melrose Industries PLC, commented, “These are extraordinary times which we have addressed with rigorous cash management and decisive restructuring actions; recently, and encouragingly, we have started to see trading improving in some key end markets.”
“Crucially, we own good businesses with significant improvement opportunities and have an experienced management team with an excellent track record,” he continued. “We have delivered good returns in tough times before and as we continue to make the strategic changes needed to position our businesses within their changed market environments, we are confident of doing so again.”