Melrose Industries Share Discussion Threads

[meanwhile] 14/3/2018 18:43

brexitplus,

You say "Every acquisition is based on hope."
Look at what your words are really saying - 'Hope is the basis for every acquisition.'
Not numbers then.

Good Lord, No. I just can't believe that.

MRO bosses will have their numbers and their idea of the prospects to increase them, for each Division. I'll just wait until they gradually come out. I do actually have 'trust' that they will have done their maths well enough.
It just surprises me that almost nobody on this site seems to give the matter a passing glance.

[brexitplus] 14/3/2018 18:18

Meanwhile.

Every acquisition is based on hope. Things change. Melrose bought FKI with the analysis, and hope, they would make a big profit. They did on most parts but unforeseen circumstances mean that Brush, and not all of it, is struggling.

Likewise with plenty of other businesses. Who would have thought that Kodak would disappear so quickly. I bet analysts were forecasting increased profits well beyond the demise of the company.

If investing were so easy and based solely on figures we would all be very rich with no risk.

No one can predict the future. I don’t know if I will be here next week, but I hope I will.

GKN is in a rapidly changing industry. To accept that and prepare the company for change is paramount.

I have worked with many people who wanted more and more information, more and more figures, before making a decision with the result that they missed big opportunities.

Personally I am confident that there is room for big profits at GKN. So is Melrose. None of us can say how much or when.

If you are not happy then you shouldn’t be invested, or take profits and leave your original stake invested.

[meanwhile] 14/3/2018 18:08

Thank you, Minerve.

[meanwhile] 14/3/2018 17:49

brexitplus,

I think you underestimate me. You say "If it was a £30 billion company called Meanwhile Plc with 10 divisions ranging between 1 and 4 billion it works in exactly the same way." I do understand how big organisations with many divisions actually function.
What I'm trying to get through to you fellows, and I'm close to giving up, is that at the end of the day we want to sell our shares at more than we paid for them and for this to happen the market has to value the businesses of MRO at more than around £15B based on the current MRO price. All I hear is a belief and a hope that the bosses will improve the businesses hugely to get to this figure.
Nobody is talking about the individual businesses, their value and how that can be increased.
It's all based on hope. It's never been based on hope in other MRO acquisitions, it's always been quite clear.

[minerve] 14/3/2018 17:41

brexitplus

I'm glad we could have a reasonable conversation today.

Have a good evening.

You too Meanwhile.

[brexitplus] 14/3/2018 17:20

Minerve. Thank you for your comments. I think we will always disagree, but what would the world be like if we weren’t all different.

I worked in Eastern Europe in communist days. While the state said everyone was equal the military and officials at all levels had their own hotels, access to dollars for the dollar shops, and power undreamed of here. And the ordinary people were crying out to try and be different but were too scared to to do or say anything. Heaven forbid that this ever happened here.

[brexitplus] 14/3/2018 17:14

Sogoesit. Agreed. Melrosehave always, as far as I can see trust the management. You only have to go through their annual reports and presentations to see how successful this approach is.

[sogoesit] 14/3/2018 17:11

Meanwhile:
Lol!
And therein lies the different views and differences about management and culture.
(I probably would not have let myself work in an organisation whose future (edit: culture) I did not understand or, least, agree with).

b+ :
I also got my promotion... but, I knew my boss's boss was on-side for a new department I had proposed to run!

(It was a highly political organisation, as might be imagined!)

[sogoesit] 14/3/2018 17:06

I think your proposal touches on the core issues of any business b+.

1. If it is a conglomerate what is the role of the centre?

2. Any business should be divided and separated so that it is outward facing to its market.

Driveline and Aero certainly require separation to focus on their different markets. Powder Metallurgy I am not sure of based on not being able to answer the question as to how much this division "serves" the other two and thus the inherent synergies between this business and the other two for development and sharing of intellectual property.

As to the role of the centre I don't think that there is any right answer on this since it usually is tailored to fit the culture of the company's governance and how the hierarchy of organisation permeates the overall organisation.
Certainly MRO governance appears to have a highly devolved operational culture so the role in their mind might require change in GKN. Change always bears risks so it remains to be seen how the potential benefits exceed costs of these risks. Having said that devolving empowerment is a strong and effective means of improving performance so long as the culture can accept it or change to accept it.

Apart the guidance and change in culture to improve performance, hopefully with appropriate incentives throughout the organisation and not just at the top, the key role of the centre in an MRO organisation appears to be Finance and driving of measured financial targets at the operational level.

[meanwhile] 14/3/2018 17:01

Not often, largely because they do what you're doing, take the past & current position and add 10%.

[brexitplus] 14/3/2018 16:55

Meanwhile. How often are analysts and forecasts correct?

[brexitplus] 14/3/2018 16:54

Sogoesit

I had a similar experience. Interviewed by the M.D. of a consultancy associated with the company I worked for he asked where I saw myself in 10 years time. Since he was 64 and a multi millionaire I answered “In your chair.” He just smiled.

I got the job.

[meanwhile] 14/3/2018 16:53

brexitplus,

Give me numbers. Only numbers matter here. My wallet has numbers of notes in it, not hopes, promises, expectations based on past performance, desires, wishes, visions. Just numbers of notes.

[meanwhile] 14/3/2018 16:49

Sogoesit,

With that answer to your boss, I'd have sacked you.

[brexitplus] 14/3/2018 16:48

Meanwhile. I think you are in one of your negative moods, as described by you this morning. I hope I am a pragmatist.

Melrose is simply the Holding Company setting the targets.

This is how I look at GKN

1 split it into three; Driveline, Aero and Metallurgy. None is much larger than Nortek.

2 as in past, let the incumbent management of each division decide how they are going to meet Melrose’s targets

3 support each the management of each division with R&D and investment as with other acquisitions

Simplistic I know but this is the way Melrose work as you know having been a long term holder.

If it was a £30 billion company called Meanwhile Plc with 10 divisions ranging between 1 and 4 billion it works in exactly the same way. Each is treated individually. The fact that is a 30 billion company is unimportant except for the initial funding.

[sogoesit] 14/3/2018 16:41

A lot of these discussions remind me of a story when I was climbing the corporate ladder.
It was the time of my annual assessment and I was bidding for a promotion to run a different bigger department.
My boss, the head of my department, said to me: "And what experience have you had running a department the size of this one?"
I said: "None. But what experience did you have of running this department or a similar sized one before you did?"
She had no answer.

Experience, hey????
What's the answer? "Skin in the game".

Or as financial regulations make you say "Past performance is no guide to future performance" and yet MIFID II enshrines the extrapolation of past performance in its PRIID sheets!

Lol!

[minerve] 14/3/2018 16:39

brexitplus

They haven't built a company of more than £4 billion at all! They have built nothing!

They have acquired companies using cheap debt and then used the assets they have acquired to pay down the debt they borrowed.

That isn't clever or something to be admired. It is opportunistic, parasitic and generally in the long-run wealth destroying.

I would be careful about your judgements on 'skin in the game' if I were you. Too much skin can lead to distortions of stewardship.

Remember Polly Peck?

[brexitplus] 14/3/2018 16:35

Good rises for GKN and MRO today, scotching my previous post perhaps.

Dana now down 1.75% and well below it’s price prior to the GKN announcement last Friday. In fact it is on a downward trend.

Read into these facts all you want. I think the result on 29th March is going to be close.

[brexitplus] 14/3/2018 16:13

I agree that Warren East is doing a good job at Rolls Royce.

I would argue, and you will most certainly disagree, that Miller, Roper and Peckham started Melrose themselves with a market cap of £13 million, and in 15 years have built a company of more than £4 billion. That’s some going. And in the main they have done it themselves.

Forget all the things they say re pensions, R&D, etc. And the fact that most of their acquisitions have been agreed.

Finally, the £286 million you talk about is in shares, and the three of them still hold all of their shares and have not sold them. If Melrose were to fail their shares would be pretty much worthless. In this way they have ‘skin in the game’ in a way that the GKN directors, or Warren East, do not. In fact, apart from Mike Turner, none of the GKN directors hold many GKN shares and Anne Stevens none at all.

I believe that this is why they are very respected in the City, and are able to raise funds very quickly.

Just my view.

I also hold RIT Capital Partners. Lord Rothschild has about £400 million in the company. I don’t see anyone criticising him.

[minerve] 14/3/2018 15:57

brexitplus

Melrose would, and plan to, do the same so I don't see what your point is. The difference is they want to take £285M out for themselves which could be used more appropriately within the business. If people believe they need remuneration of such magnitudes to get out of their bed everyday I would suggest they don't bother! Their ideals, morals and objectives do not fit in with a society where resources are getting scarcer and scarcer.

Warren East is implementing an assertive strategy which is showing fruits at Rolls-Royce which is done for the benefit of the business and not masqueraded as such for the benefit of a few executives. There is a huge difference in emphasis of execution which results in a completely different outcome of long-term shareholder value.

[brexitplus] 14/3/2018 15:47

Thanks. I thought that would be your answer. I fear that by 2020 GKN will be no more as GKN. Selling of Driveline and Metallurgy will leave Aero totally exposed to foreign buyers and the Board will eventually capitulate. Sad. I hope I’m wrong.

[minerve] 14/3/2018 15:42

brexitplus

I have already answered your question. Performance is just as much subjective as objective. I would remind the board of their duties to all stakeholders and that would be that.

If they don't agree then I would resign and move on. I wouldn't be there for purely my own benefit attempting to 'bribe' shareholders in implementing poor execution of a good business which sacrifices or damages long-term shareholder value.

[meanwhile] 14/3/2018 15:23

To set against all the criticism I have made of Minerva and his foul language, I have one thing to say in his favour.
He is the only one on this site who is talking about the detail of how Melrose might, or might not in his view, make a success of GKN. Most all others are saying that Melrose have been very successful in the past and will do so again with GKN.
Well, all scientists here should know that you can only safely extrapolate a trend
if the parameters and the equation haven't changed. They've changed with GKN.

[brexitplus] 14/3/2018 15:16

Minerve

I’m sure you could run GKN better than Melrose.

And thanks for your detailed reply. However, I don’t believe you have answered my questions.

Let me put it another way.

It’s 1st Jan 2018. Melrose doesn’t exist. You are the new CEO. The board is very mindful that the share price is performing poorly and the operating profit margin is falling year on year, and has done for several years. The board wants you to address the margin and share price problems as they see them.

The question I was really asking is what YOU would do to meet their, and shareholders’(who actually own GKN) concerns? I’m afraid the status quo isn’t an option.

Or do you simply walk away?