Graham Spooner, investment research analyst at The Share Centre, picks Melrose as share of the week.
We have been fans of Melrose for a long time, it has many years of experience and success in the engineering field and its arrival in the FTSE 100 once again highlighted the attractions of the company. The share price has recovered from its fall in November and its recent results have helped to underpin this return in confidence. Q1 was described as encouraging by management and we recommend investors buy for the chance of further growth and cash returns.
Its aim of ‘buy, improve, sell’ has proved attractive for investors and can lead to them receiving special dividends. Management has an excellent track record in improving businesses it has acquired however investors will need to be patient as these improvements take time.
Melrose’s most recent acquisition was German water and gas meter making group Elster. The focus for 2013 is on implementing change in order to improve margins at this business and investors will be pleased to hear the plan is ahead of schedule and margins have already improved