Melrose sees GKN takeover costs push it deeper into the red
Melrose Industries has booked widened annual losses after hefty costs linked to its controversial £8 billion hostile takeover of engineering giant GKN.
But the turnaround specialist hailed a “transformational year” for the group and said with costs of last year’s GKN deal stripped out, underlying pre-tax profits surged to £703 million from £258 million the previous year.
Its results showed the group slumped to a pre-tax loss of £550 million in 2018, against losses of £28 million in 2017.
Revenues for the group, which also owns US air conditioning manufacturer Nortek, hit £8.6 billion, up from £2.1 billion in 2017.
Melrose said while it expects “wider macro challenges” to continue into 2019, it remains “confident of further success” in 2019.
Justin Dowley, chairman of Melrose, said: “This has been a transformational year for Melrose.”
He added: “The former GKN businesses are proving their potential to offer the outstanding opportunities we expected and much has already been achieved in the short period of ownership.
“Despite the current economically uncertain environment, we have every confidence that we will be able to continue to unlock the substantial shareholder value from the former GKN businesses and further improve Nortek.”
The results came after Melrose took its first steps towards breaking up the former GKN business on Wednesday, with the sale of one of GKN’s businesses that makes gearboxes for agricultural and mining vehicles, and offloading its minority stake in a Belgian aerospace supplier.
It hopes to complete the sale of Walterscheid Powertrain Group to American private firm One Equity Partners by the summer.
The FTSE 100 company said it would make £200 million from the stake and unit sales.
Melrose’s takeover of GKN in 2018 drew intense union and political anger.
Its victory earlier last year brought to a close a bitter battle that had raged for months, with unions and MPs warning over job cuts, asset-stripping and national security concerns throughout the takeover saga.