Melrose gets in gear to turn GKN around
MELROSE Industries is to unlock the “full potential” of engineering giant GKN which it paid £8billion for this year, despite the costs of the acrimonious takeover battle pushing it into the red.
The turnaround specialist created a £10billion industrial powerhouse after narrowly succeeding in Britain’s biggest hostile takeover battle for a decade.
Despite a half-year pre-tax loss of £303million after a £48million profit last time – reflecting the costs of the deal and restructuring – adjusted pre-tax profit grew from £131million to £240million as revenue nearly trebled to £2.93billion.
Shares rose 7¼p to 230p as Melrose said it had found “no black holes” at its new aerospace and automotive engineering businesses, which supply Airbus and Jaguar Land Rover, and was starting to see the benefit of freeing operational management from centralised control.
It also confirmed it had appointed advisers to explore strategic options including a potential sale of its powder metallurgy arm, which could fetch an estimated £2billion.
Melrose chairman Christopher Miller said: “We are delighted with the acquisition, which has significant potential for improvement which we identified when we made our offer.
“Plans have been agreed and are now being implemented to release the full potential of GKN’s world-leading, but currently underdeveloped, businesses. This is an exciting opportunity for Melrose, its shareholders and all other stakeholders.”
Miller said the company’s promotion to the FTSE 100 and conversations with key shareholders would see him move to become executive vice-chairman, with senior independent director Justin Dowley taking up the role of chairman. Chief executive Simon Peckham said it had wasted no time freeing GKN businesses from “head office bureaucracy”, engaging with the different management teams to agree their strategic plans.
He added: “We’re facing up to what they’ve got to do.
“We have got an enthusiastic response from the people who are in charge. They are saying this is fantastic, at last someone has taken away the shackles.”