Shrunken Melrose solid after further disposals

A much smaller Melrose Industries was looking solid on Thursday, as it reported on a year in which it disposed of its largest operating business and distributed the proceeds on the sale of another.

The FTSE 250 firm reported headline operating profit of £20.8m, down from £47.7m in 2014. Its IFRS profit for the year was £1.41bn, however, up from £194.7m.

That figure included continuing and discontinued operations, and a profit on the disposal of Elster of £1.26bn.

Melrose completed the sale of Elster to Honeywell on 29 December for a total consideration of £3.3bn, which was 3.1x 2014 revenue and 14.3x 2014 headline EBITDA. A subsequent capital return of £2.4bn was made to shareholders.

A total of £200.4m was also returned to shareholders on 16 March, following the sale of Bridon. That disposal was completed on 12 November 2014.

Its sole remaining business, Brush, was performing broadly in line with expectations in what Melrose termed a tough market.

The company reported a diluted loss per share for continuing operations of 1.6p, while the EPS figure inclusive of discontinued operations, which took into account the performance and profit on the sale of Elster, was a gain of 137.1p.

"Having successfully sold Bridon and Elster, we have more than doubled the value of shareholders' equity in both investments and returned £2.6bn in cash to shareholders," said chairman Christopher Miller.

"This has been an exciting 12 months for Melrose and one that yet again demonstrated the ability of the team to create significant value for investors through our 'buy, improve, sell' model," he added.

Miller said the company remained focused on its search for an acquisition opportunity that would put its formula to work once again and will further increase the £4.3bn in cash already returned to investors since its first acquisition in 2005.

"With valuations looking increasingly attractive, we are confident in our ability to find the right deal at the right price and we look forward to inviting investors to participate in this next project in due course."

Melrose's board described the economic conditions as uncertain, which was leading to reduces business investment across the manufacturing sector.

It said that, while Brush was not immune to those economic challenges, it remained well positioned to capitalise on new business opportunities and benefit from any improvement in market conditions.

The company's board proposed a final dividend of 2.6p per share, down from 2014's 5.3p. It said it was rebased following the Elster disposal to reflect the resulting size of the group.