Melrose Industries PLC said on Thursday it had narrowed its loss in 2021, but faced headwinds from semiconductor shortages and Covid disruption.

Melrose is a London-based turnaround firm which specialises in buying and improving manufacturing firms. In 2021, its revenue was down 3.5% to £6.88 billion from £7.13 billion the year before. Adjusted revenue was £7.50 billion, up 2.0% on 2020 when adjusted on a constant currency basis.

Melrose’s share price dipped by 4.8% to 135.00 pence each in London on Thursday afternoon.

Its pretax loss had narrowed slightly to £618 million from £679 million the prior year. Melrose said its results were ahead of expectations, and with larger cash generation, net debt reduced from £2.83 billion to £950 million.

Melrose proposed a final dividend of 1.0 pence per share, bringing the total payout to 1.75p, more than doubled from 0.75p in 2020.

Having completed £729 million of capital returns to shareholders in September, it decided to hold onto the remaining proceeds of its sales of Brush and Nortek in lieu of a further distribution. It cited ‘uncertain and unquantifiable’ effects of the Ukraine situation as the reason for its ‘conservative’ position.

The Automotive and Power Metallurgy showed an initial recovery during the first quarter of the year, which shortly after was quashed by the global shortage of semiconductors. However, the divisions’ sales volumes were ahead of market growth of 3.4%. Supply shortages hit production, despite strong demand, but eased somewhat very late in the year.

In Aerospace, travel restrictions in the first half damped market recovery, but the division’s sales grew by 18% year-on-year in the second half. This was led by the division’s Civil sales, with single-aisle aircraft now making up 39% of sales.

Looking ahead, Melrose expects further recovery in Automotive and Powder Metallurgy. It also Aerospace to continue to recover, but notes ‘there is still some way to go to reach pre-pandemic levels’.

‘Against the backdrop of the ongoing market recovery, with existing improvement projects largely complete for Automotive and Powder Metallurgy and well progressed for Aerospace, there is strong belief in significant further profit improvement as they deliver their stated operating margin targets. We are therefore in good shape to deliver strong returns and realise shareholder value,’ said Chief Executive Simon Peckham.

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