Shares in industrialist Melrose jumped 5.0 per cent this morning as the FTSE 100 firm returned to profit after the pandemic.
For the first half of the year the firm company that it had made an operating profit of £223m, back in the black after an £11m loss a year ago. Revenue crept up to £3.8bn from £3.6bn.
The firm said that it was trading ahead of expectations across its businesses, with the recovery in air travel helping to offset the ongoing semiconductor chip shortage.
Previously Melrose had warned that the supply crisis would hit its growth, but took steps to restructure jet and car parts supplier GKN to limit the damage.
It said that its aviation division was now weighted towards a faster recovery for narrowbody-style aircraft flying short and medium-haul services, which have come back far quicker than long-haul services.
Later this month Melrose will return £729m to shareholders at a rate of 15p per share. This morning it added that it had the capacity for “significant” further shareholder returns next year.
It also reinstated an interim dividend of 75p, having cut the payout last year.
Chairman Justin Dowley said: “We are continuing to see recovery in all our businesses with trading ahead of expectations. Encouragingly, our Aerospace business is now weighted towards the expected narrowbody recovery.
“Our Automotive and Powder Metallurgy businesses are poised for strong growth as soon as the well publicised chip shortage abates and the progression in margins is ahead of plan with more to come.
“We have scope on our balance sheet to return more money to shareholders next year and we are excited by the upcoming possibilities.”
Laura Hoy, equity analyst at Hargreaves Lansdown, said that carrying out a successful restructuring during a pandemic was “no small feat”:
“Melrose knocked its first half results out of the park, with Automotive responsible for the majority of the group’s underlying profits. Restructuring efforts are starting to bear fruit and barring any further disruption from the semi-conductor shortage, the division could hit it’s 10 per cent margin target if sales recover to 2019 levels in 2022.
“Melrose has been working to get its balance sheet in check, with a series of disposals, cost saving efforts and a massive reduction in pension obligations. That’s opened the door for rising shareholder returns, and we were encouraged to see the group upping its capital returns by 15p this year. If all goes to plan, there should be more where that came from.”