Buyout firm Melrose boosts profits but rattles shareholders with delayed cash return
Industrial buyout firm Melrose beat expectations today as the firm slashed its debt and posted underlying revenues of £7.5bn, but bosses have rattled shareholders with a decision to defer proceeds from two sales.
Restructuring efforts across the firm saw underlying profits more than triple to £375m, excluding £826m in restructuring costs, amortization charges and acquisition and disposal expenses.
Bosses have announced plans for a final dividend of 1p per share to bring the total payout to 1.75p per share.
But the board has irked investors with a decision to push back plans to return remaining proceeds from the sale of its Brush and Nortek businesses.
Shares in the firm plunged five per cent following the announcement, which analysts at Hargreaves Lansdown said was an inevitable reaction.
“The market tends to react poorly to unexpected bad news. That’s exactly what happened this morning when Melrose announced it would withhold a planned shareholder distribution related to the sale of Brush and Nortek,” Laura Hoy, Equity Analyst at Hargreaves Lansdown said.
“Melrose is a master at flipping businesses-buying struggling or unprofitable companies and selling them for a profit. A chunk of those profits are funnelled straight into shareholders’ pockets.”
But Hoy said she “applauded” the conservative move as she said there is plenty of “opportunity ahead”.