28th Oct 2015 07:41
LONDON (Alliance News) - Aerospace and defence components manufacturer Meggitt PLC issued a profit warning on Wednesday after the group said trading in the third quarter of 2015 had been below its expectations, with little optimism for any relief in the fourth quarter.
FTSE 100-listed Meggitt said there was a "marked deterioration" in trading in September, with organic growth in its civil original equipment sales more than offset by weaker-than-anticipated trading in civil aftermarket, military and particularly energy markets, the latter hit hard by the downturn in spending from oil and gas customers.
Profitability in the third quarter also was undermined by the revenue mix for the group, while lower volumes and a number of programme deferrals by key customers hit margins. The continued weakness in energy market, which hit organic revenue, also meant Meggitt's energy division overheads were not absorbed in line with previous expectations.
As a result, and as the problems will continue into the fourth quarter, Meggitt said its underlying operating profit for the year will be "meaningfully below" current company compiled consensus of GBP369.0 million. Though free cash flow remains robust, the weaker profit outturn expected for the year will mean financial gearing for the company will be higher than previously-guided levels, it said.
In response to the challenges, Meggitt has expanded its cost-cutting plans and is considering options to cut its employee base. It will complete this process in the first quarter of 2016 and will book a restructuring charge in 2015.
"Clearly the current market weaknesses we are experiencing are very disappointing. In response, we are taking further action to reduce the cost base. We continue to invest in delivery against the many new programmes we have won in recent years, and remain confident in the medium to long-term strategic direction and financial performance of the group," said Stephen Young, Meggitt's chief executive.
By Sam Unsted; [email protected]; @SamUAtAlliance
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