Melrose - out of breath Even those companies that have run the fastest in the past few years are finding the going tough. Take Melrose. The London-listed group owns a clutch of industrial companies in the UK, Europe and the US, and has been a steady turnround and growth story since listing nearly a decade ago. Its private equity-style buy-and-improve investment policy has rewarded investors with a 200 per cent total return in the past five years, against roughly zero for the FTSE All-Share index. But Melrose's shares have been in reverse for a couple of months; an 11 per cent fall on Friday following gloomy comments about 2013 trading just about wiped out their year-to-date gain. The latest knock looks a bit of an overreaction, though companies that have offered downbeat 2013 outlooks in the past few days - quite a lot of European industrial names - suffered similar treatment. Investors are no longer surprised by gloomy forecasts, but they still do not like them. In Melrose's case, though, there may be something else going on. There has been a lot of news from the company this year, dominated by its £1.8bn purchase in the summer of Elster, a German engineering group specialising in utility meters. Elster was Melrose's biggest purchase, and a £1.2bn rights issue was needed to fund the acquisition. The deal came after Melrose was beaten to the line a year ago by Colfax of the US for Charter, another UK engineer. Melrose management has a record of improving margins and returning cash to shareholders; it hopes to get value out of Elster by lifting its operating margins from 13 per cent closer to the Melrose group average of 16 per cent. That makes a big assumption about Elster - that there is such a thing as an underperforming German industrial group. The 20 per cent fall in its share price since the middle of September suggests that some Melrose investors may not be entirely convinced.