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A company branded flag flies next to the Union Flag, also known as the Union Jack, outside GKN company headquarters in Redditch, England, on April 3, 2018.
Simon Dawson/Bloomberg News
Melrose Industries surged on Thursday, as investors looked past the company’s downbeat first-half results to signs of an improving performance.
Shares in the U.K. turnaround specialist MRO, +15.77% surged by double digits even after reporting a 90% underlying operating profit for the first half and saying it wouldn’t pay an interim dividend.
Investors took heart from the company saying performance for its automotive, powder metallurgy and key Nortek Air Management businesses since July “has been at the higher end of our expectations, with the USA and China continuing to show recovery and Europe also improving.” Its GKN Aerospace unit, however, has “yet to see the same positive signs.”
“Managing industrial businesses through difficult market conditions is what the Melrose team pride themselves on, and despite the shocking fall in profits there’s actually a fair bit of good news,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.
“The recovery in automotive is gathering pace faster than anticipated and demand for Nortek’s cooling systems looks robust, with new products likely to give sales an extra blast of support in the near future. The cash flow statement and balance sheet also tell a relatively upbeat story. The group’s managed to haul cash back into the business and actually driven a small decline in net debt during the half. Together with Melrose’s banks agreeing to waive certain lending conditions, that gives management considerable financial headroom to play with,” he added.
Another riser on Thursday was ITV ITV, +6.22%, as selling pressure on the U.K. television broadcaster subsided after the group’s official demotion from the FTSE 100 was announced.
The FTSE 100 UKX, +0.41% more broadly edged up 0.4% to 5963.15.
