Meggitt posts rise in first-half profit, announces two contract wins
Shares in engineering company Meggitt rose sharply after it posted a 6% rise in underlying first-half pre-tax profit as stronger-than-expected military revenue offset challenging conditions in the energy market, and announced two contract wins.
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Meggitt
798.80p
16:52 12/09/22
For the six months ended 30 June, pre-tax profit came in at £152m from £143.8m in the same period last year, on revenue of £793.7m, up from £718.9m. The company declared an interim dividend of 4.6p per share, up from 4.25p last year, which it said reflected its confidence in the future.
The group said it remains confident of achieving low to mid-single digit organic revenue growth for the full-year, as guided at the start of the year.
“Over the last few years we have made important decisions to further improve our competitiveness in the markets we serve. With implementation of the Meggitt Production System we are delivering valued improvements in customer experience through enhanced quality and delivery and, while this will take several years to optimise fully, the experience we have gathered to date serves to increase our confidence that over the medium term it will drive further cost and working capital benefits.
"We are investing significant sums in research and development and new product introduction, both of which remain near cyclical highs. These investments are delivering highly visible, good quality revenue streams extending out for many decades.”
Meggitt also announced two contract wins on Tuesday.
Meggitt Defence Systems has been awarded a $42.1m contract by Lockheed Martin UK to produce ammunition handling systems, while Meggitt has been awarded £10.2m in contracts from the UK Ministry of Defence to upgrade British Army small arms training systems.
RBC Capital Markets said: “Given recent concerns over the aerospace aftermarket, we think there was some investor trepidation heading into Meggitt's first-half results, so we expect there to be some relief today that the aftermarket has remained on track, and the full year guidance has been maintained.”
It added that progress in defence is also a positive, as trends in this area are improving, and said that as Meggitt's second-largest end market this could be a source of EPS upside going forward.
“Although Energy is a drag, it is the smallest of the company's end markets, but still has the potential to cause issues as the oil & gas downturn continues,” it said.
At 08:35, Meggitt shares were up 5.4% at 489.40p.