Canaccord hails "rock solid" results at Melrose

28th Aug 2014 11:00

Melrose delivered "rock solid" interims, according to Canaccord Genuity which maintained a 'buy' rating and 400p target price for the industrial investment group.The company, which invests and turns around underperforming manufacturing businesses through its 'buy, improve, sell' model, reported operating profits of £128.5m for the six months to 30 June.This was down from £132.9m previously but "comfortably beating our forecast of £118m", said Canaccord analyst Harry Philips.He said that Elster, the gas, electricity and water metering division, continued to outperform expectations and "put in a very strong performance" with margins up 2.9 percentage points over the year at 18.9%."A more than 50% improvement in operating margin in just two years [since acquisition] is a significant endorsement of the 'improve' element of the model."As for the stock's valuation, Philips said he sees "a great deal to go for on a standalone basis with the M&A catalyst to take it much further".Melrose was trading 0.1% higher at 279p by 11:12.BC