25th Feb 2020 08:16
(Alliance News) - Aerospace parts maker Meggitt said Tuesday it delivered a strong set of results in 2019, with organic revenue growth of 8% coming in ahead of its raised guidance and a good performance across all end markets.
However, it also said its chair will step down in 2021, and it warned warned growth in 2020 will be hindered by the halt to production of Boeing's 737 MAX aircraft, alongside disruption caused by coronavirus.
The stock was down 4.7% in early trade Tuesday, the worst FTSE 100 performer.
Meggitt reported revenue of GBP2.28 billion in 2019, up 9% from GBP2.08 billion in 2018, lifting pretax profit 33% to GBP286.7 million from GBP216.1 million.
The company posted organic revenue growth of 8%, which it said reflected a strong performance in growing end-markets. Within this, there was 8% growth in civil aerospace, 11% in defence and 10% in energy.
Meggitt declared a full-year dividend of 17.50 pence, up 5.1% from 16.65p in 2018.
Looking ahead, Meggitt said "sector specific factors" including the production halt of the grounded Boeing 737 MAX and supply chain disruption, as well as the "wider macroeconomic impact" of coronavirus are expected to hold back margin progression in the short-term.
Meggitt expects 2020 organic revenue growth in a range of 2% to 4% and 2020 underlying operating margin improved by 30 to 50 basis points.
"As previously guided, we also expect the level of free cash flow to be lower as a result of: an increase in capital and operating expenditure relating to our move to Ansty Park and investment in carbon capacity; an increase in cash tax paid; and one-off property-related cash receipts in 2019," Meggitt said.
"At the current time, we expect the effect of these sector-specific and macroeconomic factors to be felt beyond 2020. Nonetheless, we expect to deliver low to mid-single digit organic revenue growth and underlying operating margins in the range of 18.5% to 19.0% in 2021," the company added.
In addition, Meggitt said Chair Nigel Rudd will remain in the role until a successor is appointed but won't stand for re-election at the 2021 annual general meeting.
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.4% at 7,188.44
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Hang Seng: up 0.3% at 26,912.05
Nikkei 225: closed down 3.3% at 22,605.41
DJIA: closed down 111.86 points, 3.4%, at 3,225.89
S&P 500: closed down 3.6% at 27,960.80
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GBP: firm at USD1.2935 (USD1.2928)
EUR: down at USD1.0850 (USD1.0862)
Gold: down at USD1,642.10 per ounce (USD1,671.11)
Oil (Brent): firm at USD56.75 a barrel (USD55.65)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's Key Economic Events still to come
1100 GMT UK CBI distributive trades survey
1000 EST US consumer confidence index
1630 EST US API weekly statistical bulletin
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EU member states are due on Tuesday to finalize their negotiating priorities for a future trade deal with Britain, paving the way for tough talks with London to begin as early as next week. Britain left the EU on January 31 but EU rules still apply, changing little in practice. The two sides now have until the end of the year to strike a deal on their future relationship - spanning trade as well as security and other issues - after UK Prime Minister Boris Johnson ruled out an extension to the current transition period. The mandate is expected to be approved by EU ministers for European affairs meeting in Brussels. In London meanwhile, Johnson's cabinet is set to approve the British mandate, to be published on Thursday. London and Brussels are squaring up for difficult negotiations after outlining conflicting visions of their trade relationship.
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The trade conflict of the past two years likely left a mark on the US economy, even with the recent agreement to defuse the situation, a Federal Reserve official said Monday. The outbreak of the new coronavirus in China adds another risk factor to the outlook, which otherwise seemed poised to provide steady growth, said Loretta Mester, president of the Federal Reserve's regional bank in Cleveland. "At this point, it is difficult to assess the magnitude of the economic effects, but this new source of uncertainty is something I will be carefully monitoring," she said of the epidemic. With the partial agreement signed with China to call a truce in the dispute with Beijing – despite leaving many tariffs in place – as well as a new continental free trade pact with Canada and Mexico, Mester said the trade picture is "somewhat better" heading into 2020.
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BROKER RATING CHANGES
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INVESTEC RAISES RBS TO 'BUY'
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BARCLAYS RAISES ANGLO AMERICAN TO 'OVERWEIGHT' ('EQUAL WEIGHT') - TARGET 2800 (2000) PENCE
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COMPANIES - FTSE 100
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Croda International said its "strong business model" delivered a resilient performance in subdued market conditions in 2019. For 2019, Croda reported a decline in revenue of GBP1.38 billion, down from GBP1.39 billion in 2018, while pretax profit fell 4.9% to GBP302.3 million from GBP317.8 million. Operating profit fell 1.8% to GBP339.7 million from GBP342.5 million. The company attributed the fall in earnings to difficult market conditions in Personal Care unit and Performance Technologies division. Revenue from Croda's Personal Care unit - which is the company's growth driver - came in at GBP485.2 million in 2019, down from GBP487.8 million in 2018. In Performance Technologies, revenue was GBP430.2 million, down from GBP456.4 million in 2018. Croda International raised its full-year dividend by 3.4% to 90p from 87.0p in 2018.
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COMPANIES - FTSE 250
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SIG said Chief Executive Officer Meinie Oldersma and Chief Financial Officer Nick Maddock have resigned from their respective roles with immediate effect. The company has appointed Steve Francis as CEO on an initial contract until December 31 and appointed Kath Kearney-Croft as interim CFO. Back in December, the Sheffield-based building materials company said Oldersma had taken a leave of absence of "a number of weeks" due to a family illness. SIG said its 2019 results are anticipated to be in line with the guidance provided in January of underlying pretax profit of GBP42 million. In January, the building products supplier guided for a substantial drop in profit for 2019, amid challenging market conditions and declining revenue.
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Hammerson reported a sharply widened loss with net rental income falling and warned its dividend could be cut by almost half this year, after holding its payout for 2019. In 2019, Hammerson's net rental income fell by 11% to GBP308.5 million from GBP347.5 million. Pretax loss more than trebled to GBP573.8 million from GBP173.3 million in 2018. EPRA net asset value per share was 19% lower year-on-year at GBP6.01 each from GBP7.38. Occupancy was stable at 97%. The company's full-year payout was held at 25.9 pence per share, but it warned it could cut its dividend in 2020 by 46%. "For 2020, the board has decided to take a prudent and disciplined approach to dividends, over and above that implied by the disposals programme, and therefore removing the link between earnings and dividend, whilst still enabling the company to meet real estate investment trust and SIIC tax obligations."
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COMPANIES - INTERNATIONAL
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Credit card and financial services firm MasterCard said it expects first quarter revenue growth to be two to three percentage points slower than a year before due to the impact of the coronavirus outbreak. MasterCard said "cross-border travel, and to a lesser extent cross-border e-commerce growth, is being impacted by the coronavirus." As a result, if the trend continues through the end of the quarter, the company expects revenue growth of 9% to 10%, slowing by approximately two to three percentage points from a year before, excluding acquisitions. Revenue in the first quarter of 2019 was USD3.9 billion. MasterCard said if the impact is limited to the first quarter only, it expects 2020 annual revenue growth "at the low end of the low-teens range". Revenue in 2019 was USD16.88 billion.
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Norwegian energy giant Equinor has said it will abandon its controversial plan to drill for oil in the Great Australian Bight off the country's southern coast after coming in for fierce opposition from environmentalists. Equinor will "discontinue its exploration drilling plan in the Ceduna sub-basin, offshore South Australia," since the project's "potential is not commercially competitive compared with other exploration opportunities," the company said in a statement. The Great Australian Bight, which is north of Antarctica and south of South Australia, is one of the most pristine marine wilderness areas in the world and a breeding ground for whales, according to environment experts.
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Tuesday's Shareholder Meetings
Sage Group
Springfield Properties
Image Scan Holdings
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By Tom Waite; [email protected]
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