Melrose warns of job cuts as Q2 sales slump

Engineering company Melrose Industries warned of potential job losses as it looked to cut costs after second quarter sales slumped during the Covid-19 lockdowns.

The company said revenue fell 27% after a “steep decline” in the second quarter as lockdowns shuttered its factories. However, there was a rebound in June as measures were eased and adjusted operating profits were breakeven and Melrose said it expected to post a small first-half operating profit.

"It is also necessary to adapt the businesses for the new economic environment, which means that there has to be an even stronger focus on cost reduction throughout the group with some inevitable impact on employee numbers," the company said on Wednesday.

Cost cuts would have a net beneficial contribution of around £100m in 2021 after assuming the scheduled withdrawal of worldwide government support schemes and furlough, it added.

“While we are encouraged by the strong cash performance in the period, your board does not consider it appropriate to pay an interim dividend to shareholders in 2020,” Melrose said.

Aerospace sales in the six months to June 30 fell 18% and were unlikely to recover in the second half and were expected to fall by around 25-30% for the full year.

Trading in China in automotive and powder metallurgy was ahead of last year, trading in the US was forecast over the summer to be within 10% of last year and there were some signs of improving European demand.