Melrose Industries Share Discussion Threads

[meanwhile] 03/4/2018 10:44

Losos,

I wish you good luck with your MRO.

I also wouldn't filter anyone, especially Minerve, who has presented a sound counter argument very well. The language, we've all heard before anyway.

Being filtered out by The Sage of the Cotswolds may, in fact, be beneficial overall. He now won't get upset, while we'll still be able to benefit from his
in-depth analysis.

[losos] 03/4/2018 09:44

MEANWHILE - "I think I've been filtered now by many others

I have 'filtered' one poster and it's not you:-) You are welcome to post on your theories and also on your analysis of the MRO accounts. TBH I do not find trawling through pages of 'notes to the accounts' (which seem to accompany many annual reports these days) very enjoyable, we are told we must do it but it's a chore for me haha.

So I just have a quick read of the posts on here and enjoy the banter, since I chucked the 'day job' I thought I would have plenty of time to engage in ADVFN threads but would you believe I don't, in fact I seem to have less time now than when I did 40, 50 or 60 hours a week as a wage slave haha.

Bottom line is I will soon have some more MRO shares (To add to my very small holding) some 'cash back' and the prospect of observing MRO do what they've done previously, it may work or it may not work, the two main parameters for me will be the share price and the dividend which I shall watch like a hawk.

[gettingrichslow] 03/4/2018 09:01

T, worth watching the Business Cttee on GKN/MRO from a few weeks ago on Parliament TV (should still be available online) because they discuss this in some detail.

[brexitplus] 03/4/2018 08:44

T

My opinion, but possibly not of other posters, is that Melrose uses conservative levels of leverage, and certainly a lot less than private equity companies.

What I find is that Melrose, with its long track record of success, has no difficulty raising debt because of its excellent relations with city institutions. I believe Lloyd’s bank is a major provider of debt for the GKN acquisition.

As Simon Peckham said in a recent interview, Melrose had no difficulty in raising debt a few days after the 2008 financial crash. I’m sure that when banks perform their risk profile analysis of Melrose acquisition targets they are pretty happy.

Leverage hasn’t been a worry for me since, as is often quoted, Melrose do meticulous research and never overpay!!! And what isn’t stated in the media, a large proportion of acquisitions of all sorts involve debt.

[tournesol] 03/4/2018 08:03

B+

Thanks for that.

The most obvious question is about leverage and the extent to which MRO depend on it for the success of their business model. Can you provide any historical perspective on this?

TIA

T

[brexitplus] 02/4/2018 19:31

Hi Tournesol

I think the most important aspects of Melrose are its team and its history.

A lot is made of Chris Miller as part of Lord Hanson’s team, but Melrose is a different animal.

I looked at the backgrounds of the four main players, Miller, Roper, Peckham and Martin.

Then the history of both Melrose and their previous company Wassall Plc.

Wassall started with a few million as a shell company in 1988 and was sold for £627 million in 2000 to private equity.

After 3 years Miller and Roper formed Melrose as a £13 million AIM company in 2003 and before the GKN acquisition it was worth £4.3 billion having returned over £4 billion to shareholders.

You probably know all this.

It has been a steady stream of successes based on buy, improve, sell, with a couple of minor hiccups on the way. The media wonder why others don’t follow this model.

These were my reasons for buying a few years ago.

[tournesol] 02/4/2018 18:44

B+

how have I come to this board?

I've been using ADVFN for many many years (20?) but for me it played second fiddle first to III then to the Motley Fool. With the latter's demise (I find I don't get on with its Lemon Fool successor - yet - but still trying) I've started to spend more time on ADVFN.

Spent most of the past 30 years focussing on oil E&P - hence majorly involved on Dana, Soco and many other boards at III and Fool. Bailed out of oil some years ago and now trying to build a diversified portfolio combining some conviction growth stocks (MRO?) with some fixed interest (bonds and until recently prefs) and some Investment Trusts to blend together a diversified portfolio with a solid income base and a little excitement.

Not sure what prompted my interest in MRO - probably a newspaper article or a comment by some poster somewhere. As always when a new idea comes on my radar screen I do a trawl of info sources including: ADVFN; HL; Stockopedia; etc etc. Hence this thread.

Like what I've seen/read about MRO and dipped a very small toe in a few weeks ago - just 0.5% of my portfolio or thereabouts - just a first taster.

T

[meanwhile] 02/4/2018 18:22

getting,
"why would we mention it?" - well, err, because it is a rather key point if we're having a discussion about top lines?
Yes, but why would we in particular mention it, couldn't you mention it first?

You are a good chap for not filtering. Why has brexitplus done it? Why didn't he just put a thick hessian potato sack over his head and then he wouldn't be able to see or hear anything he didn't agree with.

[meanwhile] 02/4/2018 18:09

Thanks, Minerve, I much appreciate that.
I'll have a think about how I might reward you; with some little gift perhaps.

But brexitplus won't have learnt anything at all today.

[gettingrichslow] 02/4/2018 18:05

Minerve, I agree about the points you make in your first two paras but I don't agree with the third para. More importantly the market clearly didn't agree either because otherwise GKN's share price wouldn't have been in the doldrums pre-MRO bid. I think where we disagree is that I just don't agree that MRO are asset strippers. They tend to invest heavily in their businesses and don't give up easily when things don't go as they had envisaged (Brush being most obvious example).

Meanwhile, "why would we mention it?" - well, err, because it is a rather key point if we're having a discussion about top lines? Pretty good reason to bring it up, no?
Re: filtering - I actively want to hear different opinions to my own, and for me that's the whole point of these forums. I want to see what others think. But that also means I want to be able to challenge your views and when I do I expect a direct answer in the same way as I've tried to give you direct answers.

[brexitplus] 02/4/2018 17:59

Very quiet on the board today. I haven’t read anything from m and m!!!

[meanwhile] 02/4/2018 17:43

getting,
How do you know we haven't picked up on these Elster & FKI improvements? Why would we mention it?
You see, you're doing it again.
If a poster questions something, getting thinks he's having a wobble.
Now if a poster doesn't mention something, getting thinks he can't know about it.

You need to get a grip of yourself lad.

Thanks, though, for still keeping me unfiltered. It's a credit to you.

[minerve] 02/4/2018 17:41

gettingrichslow

I said I haven't looked at the accounts, so I am assuming. Obviously there is significant latency between not investing enough in R&D and so on and its eventual effect showing on the top-line.

What you need to be asking is what delta Melrose is having on the top line. Most of the growth could be down to pre-Melrose management and a generally supportive, growth market. The delta might not become obvious for many years, like 4-5 for example.

GKN was going to improve anyway, regardless of whoever managed them. It was growing sales/market share as a priority for various reasons and it was getting to the point where margin was going to become more of a focus. Now Melrose will take all the credit, naturally.

[brexitplus] 02/4/2018 17:34

Getting .. I have filtered both m and m. With them out of the way I think we can have an intelligent and constructive dialogue, warts and all.

[meanwhile] 02/4/2018 17:33

These 'Melrose lines' I mention above are referred to by some as 'constructive dialogue'.

[gettingrichslow] 02/4/2018 17:30

Minerve, your last post just isn't true. Check out the top-line numbers for Elster under MRO ownership - they went up significantly. Same story if you look at the majority of the various parts of FKI e.g. Marelli, Bridon etc. Surprised Meanwhile hasn't picked up on this because he claims to have followed them since the start and this is a fairly basic thing a sizeable investor should be aware of?

[meanwhile] 02/4/2018 17:19

Yes, Minerve, just little things missing from the accounts tell a story.
For example they compare full year 2017 with the 4 month 2016 results and don't separate out H2 2017, presumably because of the small fall in H2 2017 from H1 2017.

I haven't studied the accounts in any detail I must say.

Thanks for keeping me unfiltered. I think I've been filtered now by many others, presumably for not towing the Melrose 'blind-faith' and 'don't quite know how they do it' lines.

[minerve] 02/4/2018 16:59

It is plainly obvious really. Melrose's actions on companies are only really affective on the bottom-line and, if anything, act as a potential drag on the top-line. Their actions on the bottom-line will produce benefits over 3/4 years and at the end of that there is nowhere to go other than to grow sales/revenue again. That is why they sell on. Also, constant acquisitions and sales make it increasingly less transparent to follow what is going on. I say this without looking at their accounts, but I bet the accounts tell the story. They haven't created anything new here. I am not saying it hasn't been a good investment but neither was Capita until the business model started to reach its limitations.

[meanwhile] 02/4/2018 16:47

According to the Melrose Directors, on their website and in their financial reports, 'Underlying profit' is the key measure of performance.
For Nortek, results are available in their published reports for 16 months ownership. That is 4 months in 2016, H1 2017 & H2 2017 (12 months). To get Nortek totals you need to add the figures for the 3 divisions cited separately in the reports.
The figures for 'Total revenue' and 'Underlying profits' for these 3 periods are as follows :-

4 months, end of 2016 642.9 88.3
H1 2017 987.4 146.8
H2 2017 885.8 139.6

So we can see the benefits of the cost-cutting and interest cost reduction all occurring in the first 4 months.
May I now ask if anyone has seen or read of when the benefits from investment and R&D, for which they are proud, are going to flow through.

[brexitplus] 02/4/2018 13:32

Tournesol

How have you come to the Melrose board? Are/were you a GKN holder?

[meanwhile] 02/4/2018 12:36

Tournesol,

Meanwhile here. Welcome to the board.

Why not start off your experience with a signed copy of my wallet, only £3.95 + p/p?