Brokers tip Melrose Industries as group announces 9% rise in profits

28th August 2014

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Brokers have come out in support of Melrose Industries as the firm’s half-year profits rise by 8.6%.

Analysts at Investec Securities, Canaccord Genuity and The Share Centre have all reiterated ‘buy’ recommendations on the FTSE 250 listed group’s shares following the publication of the results.

The business which specialises in purchasing underperforming engineering companies and turning their fortunes around before selling them on posted a pre-tax profit for the six months to the end of June of £69.6m, up from the £64.1m achieved over the same period last year.  Revenues over the period however dropped from £875.m to £780.9m.

The results were strengthened on the back of strong results from its Elster acquisition.

Commenting on the results Melrose Industries chairman Christopher Miller said: “With profits up almost 50% since acquisition, the investment and operational improvements in Elster continue to create shareholder value on a scale which has surpassed our expectations at acquisition. Elster is on track to being our most successful acquisition to date.

“Melrose buys good businesses with scope to improve performance and deliver strong rewards for shareholders. Our search for our next acquisition continues with patience and rigour.”

Graham Spooner, investment research analyst at The Share Centre said: “The Elster business continues to perform strongly and there are still opportunities for further growth. With the acquisition exceeding expectations and having the potential to be the most successful yet, it may signal investors to start thinking when the company may sell.

“Investors’ focus may also move to what acquisition the company will make next, however management has confirmed that with asset prices rising they may have to be patient. We continue to recommend Melrose Industries as a ‘buy’ for a balanced portfolio. Management has an excellent track record on improving businesses and the company offers investors the chance of further growth and cash returns.”

 

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