4th Aug 2015 10:15
LONDON (Alliance News) - Aerospace engineering company Meggitt PLC on Tuesday said its pretax profit jumped in the first half of 2015 as revenue increased, though the company's order intake was slightly weaker in the period, as it said it has won two further deals in the US and UK.
The FTSE 100-listed group said its pretax profit for the half to the end of June was up to GBP115.8 million from GBP98.2 million, driven by a 10% rise in revenue in the half to GBP793.7 million from GBP718.9 million. Order intake, however, fell by 1% in the half to GBP775.3 million from GBP782.7 million.
Meggitt said it saw good organic revenue growth in its civil aerospace and military franchises in the half, in particular strong growth in its aftermarket revenues in the civil aerospace business, which was offset by an 18% decline in its energy business, reflecting the challenging oil and gas industry environment.
The group said it would pay an interim dividend of 4.60 pence per share, up from 4.25p a year earlier, on the back of the rise in pretax profit.
"First half revenue growth of 10% was in line with expectations, with military revenue stronger than expected offsetting the effect of challenging trading conditions in the energy market. We remain confident in delivering low to mid-single digit organic revenue growth for the full year, as guided at the beginning of the year," said Chief Executive Stephen Young.
In addition to publishing its half-year results, Meggitt said it has won two new contracts. The first is a USD42.1 million deal with US defence contractor Lockheed Martin UK to produce 40 millimetre Case-Telescoped linkless Ammunition Handling Systems for the Scout armoured vehicle programme. That deal is worth USD42.1 million to Meggitt, with production deliveries to start in 2016 and to continue through to 2021.
The group has also won a GBP10.2 million deal with the UK Ministry of Defence to upgrade British Army small arms training systems. The upgrade will support next generation virtual military training systems and Meggitt's simulated weapons inventory.
Meggitt shares were up 5.4% to 489.30 pence mid-morning Tuesday, one of the best performers in the FTSE 100.
Meggitt said civil aerospace revenue in the first half was up by 5%, with original equipment revenue up by 4%, on the back of solid growth in large jets and business jets sales, which was partially offset by a marginal decline in general aviation revenue. Organic growth in civil aftermarket revenue in the half was 5%, with a 20% rise in aftermarket revenue from Meggitt's business jets business.
The group said it is still feeling the effects of the transition away from older aircraft platforms, particularly in the large jet segment. In order to address the impact of this, Meggitt now has a solely aftermarket-focused team, which is considering a range of options including participating in the surplus parts market.
Military organic revenue in the half was up by 6%, with a better-than-expected performance in aftermarket shipments, which were hit by a lack of Defense Contract Management Agency inspector availability a year earlier, along with strong growth in the training business. This was partially offset by the completion of the Rockwell B-1B Lancer bomber jet programme and the Taiwanese Air Force upgrade programme.
But revenue in the group's energy division fell by 18% on an organic basis in the half, hurt by the downturn in spending in the oil and gas industry, where operators have been cutting capital expenditure guidance in order to maintain the economic viability of their projects in the face of the falling world oil price.
Revenue for Meggitt's Heatric unit, which makes printed circuit heat exchangers, dropped by 40% in the half, which more than offset a 9% rise for its sensing systems and control systems businesses. Though confident on the long-term outlook for the Heatric business, short-term revenue visibility is low, and the timing of a recovery is uncertain. The Heatric unit is in the process of realigning its cost base in order to cope with the near-term environment and position itself well for a recovery.
Investec said the growth in aftermarket revenue for Meggitt was encouraging, and thinks this will help the company offset the hit its Heatric business will take from the oil and gas downturn.
By Sam Unsted; [email protected]; @SamUAtAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.
Related Shares:
MGGT.L