19th Apr 2016 10:24
LONDON (Alliance News) - Shares in aerospace and defence components manufacturer Meggitt PLC pushed higher on Tuesday after it further settled nerves about its outlook for the coming year, following a rough 2015 which saw it demoted from the FTSE 100.
The stock was up 5.2% to 409.40 pence, the fifth biggest gainer in the FTSE 250.
Meggitt on Tuesday said trading in the quarter to the end of March met its expectations, with group revenue up 1.0% on an organic basis, which strips out the effect of acquisitions and currency movements. Revenue and earnings will be weighted to the second half, the group said, in line with previous guidance.
Civil aerospace organic revenue grew 6.0%, helped by 7.0% growth in aftermarket sales, while military revenue increased 1.0%. UBS analyst Cristian Nedelcu said the civil aftermarket organic revenue growth of 7.0% was ahead of the bank's expectations.
Energy revenue, however, declined 15% amid the ongoing pressures on the oil and gas industry. Meggitt makes heat exchangers and industrial controls products for oil and gas companies and, like other companies supplying parts and services to oil firms, has seen orders deferred or cancelled as oil and gas companies look to keep their projects economically-viable within a low oil price environment.
But amid subdued conditions in its key markets, Meggitt has been cutting costs and said progress was made on this in the first quarter. The group said it is is confident it will hit its target of trimming 400 staff by the end of the first half.
Meggitt said its expects low-single-digit organic revenue growth for 2016, though its reported revenue growth will benefit from the strength of the US dollar against sterling.
The in-line start to 2016 will soothe investor concerns following a rough 2015 for the group.
In October, Meggitt shares began a spiral towards losing their place in the FTSE 100 index of blue chips when the company warned that deteriorating trading conditions in the third quarter, plus little sign of any improvement on the horizon, meant underlying profit would miss market expectations. The warning wiped a fifth off Meggitt's market value.
In December, Meggitt said it expected the negative trends seen in 2015 would continue into 2016, particularly for the energy business and amid sluggish trading in aerospace and military sectors.
However, in its annual results in February, the group did guide to marginal organic revenue growth in its civil aerospace business in 2016, a prediction borne out by the first quarter performance, and noted acquisitions should add to revenue growth for the division.
In addition, Meggitt said military markets have entered a "more benign phase" following years of squeezed defence budgets globally. It remained cautious on military growth, however, as it will take time for this upturn in budgets to flow through.
By Sam Unsted; [email protected]; @SamUAtAlliance
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