FTSE storms ahead, Melrose updates on GKN trading and Focusrite amplifies the small cap space
Archived article

Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

“It’s another positive day for the FTSE 100, advancing 0.4% to 7,429 and extending a winning streak since late March. The UK blue chip index has taken its cue from strong trading on Asian markets earlier today and is clawing its way back towards the record highs marked in January,” says AJ Bell Investment Director Russ Mould.

Melrose Industries

“Industrial buyout firm Melrose Industries has updated on trading at GKN for the first time since its controversial takeover of the group.

“The numbers cover the first quarter, before Melrose assumed control, and vindicate its argument that the automotive and aerospace engineer needed fixing.

“Performance had deteriorated materially on a year-on-year basis with Melrose identifying the performance of the aerospace business as ‘unacceptable’ and an immediate priority.

“The balance sheet shows the impact of deal fees as GKN looked to avoid falling into the hands of Melrose and this is without including the cost of the abortive sale of its Driveline business to US firm Dana.

“A key feature of previous turnarounds executed by Melrose has been an improvement in the level of profitability – it is therefore worth taking a note of its entry point margin of 7%.”

Focusrite

“It can be easy to overlook smaller companies when there are so many big name brands issuing news on a regular basis. However, the smaller companies universe is often home to some very impressive businesses.

“A perfect example is music products supplier Focusrite, founded and chaired by former Led Zeppelin sound engineer Phil Dudderidge.

“Its half year results show 26.8% rise in pre-tax profit, 33% rise in the dividend and net cash more than doubling year-on-year. These levels of growth would make your typical large cap boss green with envy.

“Its performance isn’t a one-off as Focusrite has delivered growth in all key metrics ever since it joined the stock market in 2014.

“For all of the doom and gloom surrounding global stock markets this year, it is worth remembering that there will always be some bright spots.”

These articles are for information purposes only and are not a personal recommendation or advice.

  •

The daily market update is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.