Melrose Regulatory News (MRO)

30 March 2020

MELROSE INDUSTRIES PLC

 TRADING UPDATE

Melrose Industries PLC ("Melrose" or the "Group") today issues an update given the evolving circumstances due to COVID-19.

Trading update

Following a successful 2019, the Group traded in line with management expectations from January through to mid-March. From mid-March onwards a significant deterioration started to be seen and was experienced in the end markets that Melrose serves as a result of COVID-19. Given the current uncertainty around future demand as governments carry out unprecedented actions in many countries, the Group is unable to provide a meaningful outlook at the current time, but is closely monitoring and adapting to all developments. 

Update on the businesses and on cash management

As a consequence of the changed market environments, significant and accelerated management actions have been put in place across all businesses and countries in the Melrose Group, to reduce cost and preserve cash until the market positions improve.

Melrose has significant levels of cash expenditure, including capital and restructuring projects and many other costs, which it normally invests for the long term value of its businesses but which have now been stopped. In addition, working capital levels are being tightly managed and reduced.

Melrose has a strong track record of managing cash and this has now been prioritised over all other considerations until market conditions improve. All businesses are subject to tight restrictions and are in regular and close communication with Melrose HQ.

The Automotive and Powder Metallurgy businesses have factories that are largely closed outside of Japan and China. The Aerospace factories are largely open, but running with reduced requirements. The impact on the Nortek businesses has been varied. Across our businesses all of our Chinese factories are now open.

Melrose is acting appropriately with regard to its employees and cost base and taking advantage of various Governmental schemes wherever it is suitable to do so, primarily in the UK and Europe. In many of our businesses (including Melrose) senior salaried staff are taking a temporary 20% pay cut to help support the business.

Financial position

Melrose debt facilities are well balanced and there are no short term maturities. Prudently the Group took action at the end of last year to extend the maturity of the c.£0.9 billion committed term loan, solely at Melrose's option, from April 2021 to April 2024.

The Group's committed c.£3.2 billion revolving credit facility is repayable in January 2023. In addition to these committed banking lines the Group has two bonds: a £450 million bond maturing in September 2022 and a £300 million bond maturing in May 2032, both of which have no financial covenants.

In total the Group headroom at the end of February 2020 on these committed facilities was c.£1 billion, which largely remains unchanged from December 2019.

The Group has a very supportive banking syndicate and consequently, with their agreement, we have secured a net debt to EBITDA covenant waiver in relation to the June and December 2020 testing periods to provide flexibility should this be needed. The covenant waiver covers the Group's primary borrowings, which are the revolving credit facility and the term loan. There was a modest cash cost to revise this financial covenant. On behalf of all stakeholders, we thank our banks for their speedy and supportive response.

Dividend

The Group, and each business, is focused on maintaining its financial position through strong cash management given the significant level of trading uncertainty. In these circumstances your Board has decided that it must act prudently and conservatively in respect of payments to shareholders. As such, the Board has decided not to pay the 2019 final dividend due to be paid in May 2020, and intends to withdraw the final dividend resolution at the forthcoming AGM, and will keep under review any decision in respect to further dividends.

Simon Peckham, CEO of Melrose Industries PLC said:

"While the current circumstances are unparalleled, Melrose has a track record of managing our businesses successfully in tough times and we thank all our employees for their extraordinary efforts to ensure this happens again. We have taken very significant action to mitigate the effect of this unprecedented crisis. With the help of our employees, we will do whatever is needed to protect the Group and to ensure that it is in the best position to move forward when this crisis recedes."

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Enquiries:

Melrose Investor Relations:

+44 (0) 207 647 4500 / +44 (0) 7974 974690 / ir@melroseplc.net

Montfort Communications:

Nick Miles

+44 (0) 20 3514 0897 / +44 (0) 7973 130 669 / miles@montfort.london

Charlotte McMullen

+44 (0) 20 3514 0897 / +44 (0) 7921 881 800 / mcmullen@montfort.london