Melrose boosted by Elster acquisition in 2012

published 6 March 2013

Industrial manufacturing conglomerate Melrose saw revenues rise by a half in 2012, helped by last year's acquisition of gas metering group Elster.

Revenue from continuing businesses totalled £1.55bn last year, well ahead of the £1.01bn reported the year before.

Elster, a world leader in metering products with nearly 7,000 employees, was acquired in August 2012 for an enterprise value of £1.8bn. It generated some £411m in turnover in just four months of ownership last year.

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While it is still early in Elster's integration process, the company said that it is "already very pleased with the business and the potential for improvement over the next few years".

Profit before tax surged from £155m to £214m, while adjusted earnings per share rose from 15.8p to 16.1p, with operating profit increases experienced in all three divisions of existing Melrose.

However, the operating margin fell from 16.1% to 15.7% over the year, mainly due to the inclusion of Elster, whose margins are lower than average at this stage.

Chairman Christopher Miller said: "We are very pleased with Elster and are already one year ahead of our improvement plan, increasing margins faster than expected.Existing Melrose businesses have performed well and Elster is proving to be another great opportunity to create more value for Melrose shareholders."

The company is to pay a final dividend of 5.0 per share, higher than the 4.8p paid out the year before. The total dividend was lifted from 7.4p per share to 7.6p per share.

OutlookThe firm's outlook was cautiously optimistic, with Miller hailing the potential of Elster. He said: "I said last year that we were optimistic about identifying a suitable acquisition to continue the excellent growth of the group.We firmly believe that Elster represents such an opportunity."

As for the Energy division, Melrose reported in November that order books had weakened. While this continues to the case, the company said it remains confident of the outlook and expects further progress this year.

"Economic recovery is not yet in sight in Europe, nor completely established in the US, but our mix of businesses with their strong positions in good end markets and opportunities for improvement gives us confidence for the future."