Investment Column: Umeco: a little company that could go a long way

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The Independent Online

Umeco Looks after the little things for aerospace and defence contractors such as Rolls-Royce. It makes sure the company has enough nuts, bolts and rivets for its big engine products. It supplies 85 per cent of the individual parts that make up a typical engine, although they account for just 1 per cent of the cost.

Umeco Looks after the little things for aerospace and defence contractors such as Rolls-Royce. It makes sure the company has enough nuts, bolts and rivets for its big engine products. It supplies 85 per cent of the individual parts that make up a typical engine, although they account for just 1 per cent of the cost.

This outsourcing of supplies is becoming increasingly common across the industries in which Umeco operates. With some judicious acquisitions, it has been strengthening its relationships in the US, and was able to report a modest increase in turnover despite the continuing recession in aircraft manufacturing. Umeco should be able to reverse its profit decline this year and a pick up in the industry should feed through from next year.

The City was a little disappointed that Umeco held its final dividend yesterday, especially when its enthusiastic outlook statement warranted an explicit signal of the group's financial confidence. But assuming a modest increase next year, the shares, down 10p at 352.5p, should still yield a respectable 3.6 per cent. We last wrote on this stock two years ago, saying "buy" at 285p. It is still fairly priced and worth tucking away for the long-term.

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