Melrose Industries PLC, UK, has announced its financial results for the year ended December 31, 2021, reporting the company to be ahead of expectations and with better cash generation and a bigger reduction in net debt.
All businesses returned to growth and, despite global supply challenges, group sales were up 2% year on year. Group adjusted operating profit tripled to £375 million, said to show the substantial benefit of restructuring actions increasingly coming through.
“We have enjoyed another year of good cash performance across the Group, while continuing to invest heavily in sustainable technology and restructuring improvements,” stated Justin Dowley, Melrose’s non-executive chairman. “We achieved strong free cash flow generation, which has been a feature throughout our ownership of the GKN businesses. Along with disposal proceeds, it has enabled us to repay all of the £3.4 billion of net debt drawn to fund the GKN acquisition.”
GKN Powder Metallurgy
GKN Powder Metallurgy reported a strong performance in 2021, with adjusted operating margins for the full year expanding to 9.3% and adjusted operating profit up 162%. This improvement was noted as having come from stronger activity levels, primarily during the first quarter; tight cost management during the lower activity months and the realisation of benefits arising from restructuring activities initiated during prior years.
Melrose stated that 2021 was marked improvement in activity levels for GKN Powder Metallurgy across all geographies. The demand for vehicles and other goods in general, combined with the need by the industry to recover from the low stock levels maintained during the previous year, produced very high demand during the first quarter of the year. This high activity level in the first three months was followed by lower, more erratic demand, stemming from the semiconductor shortage’s effect on the automotive industry.
For the full year, GKN Powder Metallurgy achieved a revenue growth of 13% compared with the previous year. Although revenue levels remain below pre-pandemic levels, sales volume growth for the business in 2021 was double the production growth of the wider market, highlighting the increased market share achieved by the business.
As part of the improvement plan, the core business has been streamlined, resulting in the divestment in May 2021 of a non-core low margin structural plant in the USA, and a planned Canada plant closure, which is set to be concluded during 2022. In addition, the closure of a Sinter Metals site in Germany was communicated in November.
Having taken it through the initial development phase, GKN Hydrogen, the hydrogen storage business, was also separated into a standalone business under direct Melrose management at the end of the year.