Investment: Mayflower is back on course

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Investment: Mayflower is back on course

MAYFLOWER has been sailing in calmer waters in recent times. Since last year's ill-fated attempt to take over its bigger rival Vickers, the auto parts maker has gone back to basics and concentrated on its core businesses.

This strategy is bearing fruit, as yesterday's 22 per cent jump in first- half profits to pounds 19.6m shows. The strike at General Motors, one of Mayflower's biggest customers, had only a limited impact, cutting pounds 1.5m from its US operations' turnover. This was more than offset by sales growth in the UK and Europe.

The company is also sounding positively aggressive on acquisitions, saying that it plans to spend its pounds 250m war chest very shortly.

So why did the shares plunge over 6 per cent yesterday to 206p? True, the shares had risen ahead of the results. But the market's caution stems mainly from the uncertainty over Mayflower's future.

For a start, although the GM strike is now over, it will cost Mayflower a further pounds 4.5m in sales in the second half as the GM plants slowly return to normality. Secondly, earnings growth could be hit by a downturn in the UK economy, which is set to hit car manufacturers hard.

Finally, and more importantly, the shares have risen 14 per cent this year, outpacing other engineering groups. After yesterday's slide, they still trade on a multiple of 16.5 times

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