UPDATE 1-Melrose sees orders accelerating in second half

Tue May 13, 2014 7:00am EDT

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* Shares gain as much as 3.3 pct (Adds details and analyst comments; updates share movement)

May 13 (Reuters) - British industrial investment firm Melrose Industries Plc said it expected orders to accelerate in the second half of the year after rising 3 percent in the year to date, pushing up the company's shares in morning trading.

Melrose, which follows a private equity model of buy-improve-sell, said its two largest businesses - consumption meter maker Elster Gas and Brush Turbogenerators - had orders for four and six months production, respectively.

"The higher order intake is in the higher-margin businesses, which is positive for profits," Numis analysts David Larkam and Scott Cagehin said in a note.

Shares in the company rose as much as 3.3 percent, making the stock one of the top percentage gainers on the FTSE-100 Index on Tuesday.

Orders rose 10 percent at Elster Gas, which accounts for about 40 percent of Melrose's revenue.

Orders in Brush Turbogenerators, a manufacturer of electricity generating equipment, rose 8 percent.

"Given the weakness being reported elsewhere in energy markets, the third consecutive quarterly increase in order intake at Brush is very reassuring," Numis analysts said.

Melrose normally reports a 47:53 split on operating profit between the first and second half of the year but this year it could be closer to 42:58, Liberum analysts said in a note.

Melrose, which sold five companies in 2013 for a total of 950 million pounds, also said it was keen on making a value-enhancing acquisition but would wait for the right price.

"Management comment that they are still keen on the next purchase but will remain disciplined on price, (is) encouraging in the current testosterone-boosted M&A market," the Numis analysts said.

Melrose said its financial performance would likely be hurt by an additional 1 percent if current exchange rates for the pound continued for the rest of the year.

The company, which gets about 90 percent of its revenue from outside of the UK, said in March it would be difficult to achieve revenue growth this year because of the pound's strength and that it expected "a forex headwind of about 5 percent". .

They company's shares were up 1.8 percent at 292.4 pence at 1100 GMT. (Reporting by Roshni Menon and Aashika Jain in Bangalore; Editing by Ted Kerr and Don Sebastian)

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