Meggitt boosts profit but warns over coronavirus and 737 Max hit
Meggitt said that it would be impacted by both the coronavirus outbreak and the halt in production of the 737 Max after in year in which the aerospace engineers boosted profit by 33 per cent.
Shares in the British firm fell 2.7 per cent by midday.
The figures
Statutory profit before tax increased from £216.1m in 2018 to £286.7m this year, as the firm kicked on despite disruption to its supply chains and the long-running 737 Max saga.
Revenue grew eight per cent, from £2.1bn to £2.3bn, as the company grew in all three of its main business areas, aerospace, defence and energy.
Meggitt reported £267.8m in free cash flow, a 60 per cent increase on the year before.
The blue-chip stock also reduced net debt by 15 per cent, reducing its balance sheet from £1.1bn to £911.2m.
Earning per share grew 24 per cent to 28.8p, while the company declared a dividend of 17.5p.
Why it’s interesting
Meggitt said that although it was anticipating a hit from the coronavirus impact, it nonetheless expected to deliver growth in both revenue and operating margins in 2020.
The announcement comes after the FTSE had its worst day in three years yesterday, shedding 3.3 per cent as the market reacted to growing fears of a potential pandemic from the coronavirus, which has now infected about 80,000 worldwide.
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Meggitt will also have to contend with the ongoing shutdown in production of the Boeing 737 Max, which has been grounded since last March after two fatal crashes.
In recent weeks there has been renewed optimism from Boeing that the plane will be licensed to fly again this year, with company officials estimating it could be airborne by mid-summer at the earliest.
The firm also said cash flow would be impacted by its move to Ansty Park in Coventry, as well as further investment in carbon capacity.
Jeremy Bragg, aerospace and defence analyst at Redburn, said: “Meggitt delivered strong results for 2019, notably organic revenue growth and cash flow, but the outlook for 2020 and 2021 is disappointing due to a combination of factors including the 737 MAX delays and COVID-19.
“Whereas management previously targeted a 19.9 per cent operating margin in 2021, it now aims for 18.5-19.0%. Moreover, free cash flow looks set to fall from £268m in 2019 to below £200m in 2020, considerably below the market’s expectations. Cash conversion will then improve again in 2021 and 2022″.
What Meggitt said
Group chief executive Tony Wood said: “Over the last three years, as a result of the successful execution of our strategy, the Group has become a more focused, higher quality and more resilient business, reflected in the delivery of strong levels of organic growth and cash generation.
“We delivered another strong set of results in 2019, with organic revenue growth of 8 per cent, ahead of our raised guidance, and good performance across all end markets, particularly defence.
“Our performance was underpinned by growing end-markets and strong execution across our teams during the first full year of our new customer‑aligned organisation”.