Melrose executives set to reap the rewards of increasing shareholder value

Oliver Gill
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Melrose specialises in buying engineering firms, turning them round and making a profit by selling them

The top brass at engineering turnaround specialist Melrose Industries are in line for one of largest paydays of any FTSE 100 company, according to reports.

Executives are to receive around £206m according to information obtained by Sky News.

A five-year bonus scheme was approved by shareholders in 2012 and details of the payouts will be laid out in accounts to be published next month.

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Sources said an accounting note in Melrose's recent annual results disclosed a £22.8m charge for employers' National Insurance‎ contributions, giving a steer on the scale of the returns from the bonus scheme.

‎One insider calculated that based on the current 40-day average share price of about 210p, execs will be in line for a total award of £206m.

Sky News contacted a number of Melrose's top shareholders which said they were comfortable with the size of the payout.

"We signed up to this knowing the scale of the upside for management," said one investor.

Strong fundamentals

Melrose operates by buying manufacturing businesses with "strong fundamentals" but which it believes can improve their performance. The firm tends to use low amount of debt to fund its acquisitions and once it has turned the firms around, sells them, returning the proceeds to shareholders.

Last year, the group asked investors to dip into their pockets via a £1.6bn rights issue in order to fund a £2,2bn purchase of kitchen stove hoods and extractor fans firm Nortek. The acquisition led to Melrose tripling revenues in 2016.

Read more: Cold fusion: Turnaround group Melrose snaps up US aircon company for £2.2bn

Melrose's board is led by chairman Christopher Miller and deputy chairman David Roper. Together with chief executive Simon Peckham and finance head Geoff Martin, the four are expected to receive around 75 per cent of the aggregate payout.

The bonus is calculated by handing participants in the bonus plan 7.5 per cent of the total shareholder gain.

A further 20 senior managers will share the remainder of the pay pot.

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