Melrose shrugs off slowdown as profits jump

SHARES in engineering buyout specialist Melrose soared yesterday as it reported a huge hike in full-year profits, although it sounded a cautious note.

The buyout firm bounced back from a profit warning late last year to report a 38 per cent jump in profits over the year.

Full-year pre-tax profit came in at £214.3m, up from £154.7m in 2011, on revenues of £1.5bn.

Melrose, which follows a private equity-type model of investing in companies to improve their performance, warned at the end of last year of a slowdown in its energy business.

“Conditions in the overall world economy are still very hard to predict with any certainty,” chief executive Simon Peckham said yesterday.

“We are likely to see volatility in the UK caused by rapidly changing currency markets.

He added: “As a result of these factors we are expecting a year in which growth may be challenging but our exposure to good markets, opportunities for improvement at Elster and the fruits of recent investment should still position us well.”

The turnaround group added that its acquisition of Elster, which it completed last year for £1.8bn – its largest ever acquisition – was performing well.

Operating margin at the German metering firm rose by 1.9 per cent to 14.1 per cent, while operating profit was up 11 per cent.

Other Melrose businesses saw their operating profit increase by nine per cent over the year.

Jonathan Jackson, head of equities at Killik, yesterday called Melrose’s results “very reassuring”.

“The commentary on trading is slightly more upbeat than at the time of the last update,” he added.

Shareholders cheered the results yesterday, which sent Melrose shares on a sharp rally to close 2.58 per cent higher at 266.7p.