Melrose Industries Share Discussion Threads

[brexitplus] 04/4/2019 09:18

Yertiz, I agree with everything you say. Mrs Brexitplus was involved in Lean management and say that, from her experience, the NHS and Lean Management are at the extreme opposite ends of the spectrum.

There is a “British Mittelstand” but a recent report says

“Whilst continuing to grow, a recent study which performed a comparison between German and British successful mid-cap companies suggests that British firms are far more short-term orientated in terms of management and policy, raising the question whether the UK Mittelstand can endure over time in the same manner as the German equivalent”

[meanwhile] 04/4/2019 09:17

Yes, Yertiz, you've got it, that's where I fall down, 'diversifying skill sets' and 'Lean/6 Sigma management'.

[yertiz] 04/4/2019 09:12

You could add: driving efficiencies, Lean/6 Sigma management, transparency, motivational, diversifying skill sets and improving Job satisfaction to that list, B+.
All the areas where the NHS fall down as do Meanwhile, Minerve 2 and indeed our elected Members of Parliament.

[brexitplus] 04/4/2019 09:06

Good to see Deutsche Bank and Peel Hunt reiterating BUY this morning. In fact every broker forecast across the board since October is BUY.

[meanwhile] 04/4/2019 08:44

Melrose would do better not announcing intentions on expenditure and investment, as they did yesterday with the £50M per year for 5 years on electric vehicle components, or at least not give the figures.

It's the numbers that give them the problem. Every figure they announce on investment and spending is compared to the figure that was expended on the 2018 bonuses. They have created this rod for the Company's back and they'll need to carry it for a long time.

I'll be discussing this at the party tonight in Las Vegas.

[brexitplus] 04/4/2019 08:08

Thanks Getting.

Of course, the advantage Melrose has is that the companies they own have been taken private.

Rather like German mittelstand companies, which are “family owned”, and include companies like Bosch, Melrose are able to do what is necessary to improve performance unencumbered by the need to please shareholders and the market as a whole.

A lot was said at the time of the acquisition of GKN about Melrose not having expertise in the industry, about them being asset strippers, and being short-termist. All are being proved wrong. They are building their companies for the future.

From your post I see that Porky is spouting his old chestnut about Melrose doing nothing special. Of course his investment approach of investing in turnaround situations is based on the fact that many companies don’t do what Melrose do, and most often are not capable of doing so. There are so many failed turnarounds, and as Losos says increasing revenue is not the key to success.

As you point out, there are millions of football teams worldwide. They watch top matches on TV, they know what they need to do, and yet they can’t put it into practice like Barcelona. Melrose are, to my mind, the Barcelona in turn rounds, which explains why financial institutions support them so strongly.

Going through the Capital Markets Day Presentation is very enlightening and shows why Melrose are so successful in what they do. I recommend it to all here. I’m sure lots of companies, like Rolls Royce, are looking at it and saying “why don’t we do that.”

For those not familiar with Mittelstand companies, which are very unlike our quoted companies, features include

Family ownership or family-like corporate culture
Generational continuity
Long-term focus
Independence
Nimbleness
Emotional attachment
Investment into the workforce
Flexibility
Lean hierarchies
Innovativeness
Customer focus
Social responsibility
Strong regional ties

[meanwhile] 03/4/2019 22:16

The remainers are correct in saying that a 'no deal brexit' was not on the 2016 referendum ballot paper. What was on the ballot paper was 'remain' and 'leave'
(the EU).

Also not on the ballot paper was that the 'leave' we would adopt would be determined by Vince Cable, Oliver Letwin, Jeremy Corbyn, Nick Boles and Little Jimmy krankie.

[gettingrichslow] 03/4/2019 22:07

B+, you are spot on - good summary.

Porks, plenty of other companies try exactly this approach. But pulling it off isn't as simple as it might seem to the casual observer. Let me try a football analogy that you might be able to follow. One can easily watch Barcelona and say 'hey, let's do that, they just keep the ball, play one-touch give and go football, wear the other side down by dominating possession, get a goal through a couple of quick one-twos and it's another easy win, how difficult can it be?'. And the next thing you know, every team from Swansea City to Raith Rovers are trying it. But how many can pull it off? And it's the same with Melrose. I can say from personal experience that it isn't easy to deliver lasting efficiencies in a big company. I've seen numerous examples of failed efficiency programmes that eventually get cancelled after completely disrupting operations in the process. Just because Melrose have done it time and time again does not mean it's easy. After all, the previous management at Elster and Nortek etc didn't manage it did they?

[minerve 2] 03/4/2019 21:53

"LIVING FOSSIL GIVEN NEW HOME" - BBC

I thought this was about you Brexit or Yertiz until I read the article! LOL

[minerve 2] 03/4/2019 21:44

WOW amazing. These guys really know how to turn lead into gold. I wonder why nobody else follows their methods?

ROFLMAO!

[brexitplus] 03/4/2019 21:34

Losos

It’s a very simple approach which Melrose have demonstrated time after time. They don’t concentrate of increasing sales but increasing operating profit margin on the sales they have. They are expert at doing this. In fact if you go back through the records the companies they have bought and sold generally don’t have a great amount of sales growth. As the presentation states, they are happy to get rid of unprofitable contracts or renegotiate them or make them profitable byimproving efficiency.

The presentation explains exactly what they are doing, what has been implemented and the timescales.

Eventually this translates through to operating profit margin and the acquirer has a profitable and very efficient business which is more valuable than when initially bought by Melrose.

Other businesses should learn from them. Senior is taking a similar approach.

[minerve 2] 03/4/2019 21:24

Look at the car industry - consolidation/mergers/collaboration. What does that tell you?

I'm in JMAT. Catalytic converter revenue growth (for cars) outperforms underlying car sector growth. Why? Because the need to meet emissions regulations drives pricing power. JMAT also has a very attractive looking cathode material for battery tech - outperforms Panasonic/Tesla.

I don't hear JMAT saying "margin improvement only requires limited sales growth". LOL

Perhaps Melrose are resigning themselves to something inevitable? I wonder what that could be?

LOL

[minerve 2] 03/4/2019 21:18

"Margin improvement only requires limited sales growth"

Read that again. What are they telling you?

Plenty of OTHER fish in the sea.

[losos] 03/4/2019 21:09

B+ - "Margin improvement only requires limited sales growth, therefore the required actions are largely within our control"

I haven't had time to read the entire presentation today but this was one thing that also caught my eye and confirmed (if confirmation was necessary) that the MRO guys know what they are doing.

Some companies (Including one or two I've had shares in) go all out for sales growth thinking it will impress the media, shareholders, and their banks when in fact it has ruined their cash flow and taken them to the brink of bankruptcy.

With share price going the way it has recently things are looking good. I just wish this Brexit thing could be sorted and we might really start motoring.

[gettingrichslow] 03/4/2019 20:50

Adding the word 'generally' doesn't make your statement any more correct! It is GENERALLY the case that getting efficiencies is an ongoing thing, not a one-off. If you think you can go for it once and then you can sit around for the next ten years, and inefficiencies won't creep back in, then you are living in cloud-cuckoo land. Either that or you've never been involved in a big company. Quite possibly both.

[brexitplus] 03/4/2019 20:05

I do agree Getting re efficiencies. Anyway, Porky is showing his ignorance of Melrose and how it operates. It is the value of the GKN companies when they are sold that matters. My experience is that once you generate efficiencies you are looking to continue doing so.

Mind you I am only responding to your post since, as they know, Porky and Ryewhile are completely filtered.

[gettingrichslow] 03/4/2019 19:42

If you keep posting the same repetitive, dull stuff, I'll keep telling you to get a life. You are literally like a broken record. Do you read the Guardian and vote Lib Dem too??

"Efficiencies can only be delivered once" says the Porky one. Garbage. This from someone who pretends he 'founded a stock market darling'! Can't wait to tell this to our CFO tomorrow in Frankfurt. I wonder if he'll say "Oh ok then, we'll cancel the current efficiency programme because we already made big efficiencies over the last 3 years so we won't go for any more if that's what Porky says"!

[meanwhile] 03/4/2019 18:37

Wow. £50M a year for the next 5 years to build new factories.

That's about 40% more than the last bonuses paid to 4 directors.
Now that is something to think about.

getting, before you complain, clear off.

[brexitplus] 03/4/2019 18:30

Definitely Melrose asset stripping!!!

“Liam Butterworth, GKN automotive chief executive, said the company would spend £50m a year for the next five years building factories for electrical car parts.”

Hmmm.

[minerve 2] 03/4/2019 18:16

brexit

Your team ManU lost last night. 2:1 against Wolves. They also knocked you out the FA Cup. They have put in a request to play you every week? Do you think the poisoned dwarf will take up the offer?

LOL

[minerve 2] 03/4/2019 18:06

This thread is a smorgasbord of intellectual offerings....

[brexitplus] 03/4/2019 18:03

Key point from today’s presentation

“Margin improvement only requires limited sales growth, therefore the required actions are largely within our control”

It’s the way Melrose work, then sell a much more efficient business.

[ryelodge] 03/4/2019 17:23

Wow! In a few months he's identified £325 million of annual cost savings. He's got to be due 10% of that amount reflected in his Bonus, and a bit more shared among the other chaps. That's fair isn't it?

[brexitplus] 03/4/2019 16:53

From Evening Standard

“Melrose Industries, the engineering investment company that bought GKN in a bitter £8 billion hostile takeover battle last year, on Wednesday pledged a £300 million investment to ramp up its activities in the fast-growing electric vehicle market.

The step up in investment came as part of an aggressive plan outlined by new head of GKN Automotive, Liam Butterworth, to boost margins in the car parts division beyond what shareholders had been promised.

The £300 million, to be spent over the next five years, will see GKN building factories catering for electric vehicles and boost Melrose’s profile as a route for UK investors to gain exposure to the expected electric vehicles boom. GKN has a 47% market share of providing conventional diesel and petrol cars with their front-wheel driveshafts. However, the company only makes between £60 and £120 per vehicle.

Electric cars are much more lucrative because they require driveshafts for both front and rear wheels, as well as two so-called electric drive units (electric motors and transmission). It has only shipped 850,000 of such “eDrive” systems, but each represents income per car for GKN of £2500 to £3500.

The company on Wednesday outlined plans to get its automotive profit margins from last year’s 6.7% to 10% — an increase on the 9.5% margin previously expected. The weak global car market, combined with China’s tariff wars, have weighed on Melrose’s share price.

Butterworth said he could save more than £200 million with better procurement, £75 million from more efficient operations and £50 million from reducing fixed costs.

Melrose beat profit forecasts in full-year results published last month.”