Lower-than-expected aftercare revenues from the Boeing 737 Max barely dented the top-line performance of Meggitt (MGGT) in the first half of 2019. Even though the plane – to which the company supplies seals, composites and parts of the safety system – isn’t expected to take to the skies again until December, management has upgraded revenue growth guidance to between 4 per cent and 6 per cent as the outlook for the rest of its civil business improves.
Boeing remains an important customer of the engineering group. Both the 787 and 737 Max jets demanded more parts in the first half, helping to send revenue in the original equipment business up 11 per cent to £260m. Aftercare markets – tapered slightly by the grounding of the 737 – were similarly strong, with revenue up 7 per cent.
Management plans to accelerate growth further through increased availability of stock. That and a build-in buffer stock, partly to mitigate potential Brexit damage, sent inventories up 12 per cent to £482m. Despite this, free cash flow was boosted by a reduction in capitalised development costs and the £21m sale of land and buildings. In the second half of the year, as the move to the group’s new ‘super site’ nears completion, capital expenditure is expected to ramp up significantly.
Consensus analyst forecasts are for adjusted earnings per share of 35.8p in the year to December 2019, rising to 39.2p the following year (from 33.7p in 2018).
| MEGGITT (MGGT) | ||||
| ORD PRICE: | 599p | MARKET VALUE: | £4.65bn | |
| TOUCH: | 599-604p | 12-MONTH HIGH: | 410p | 607p |
| DIVIDEND YIELD: | 2.8% | PE RATIO: | 32 | |
| NET ASSET VALUE: | 313p* | NET DEBT: | 42% ** | |
| Half-year to 30 Jun | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 0.95 | 105 | 11.7 | 5.30 |
| 2019 | 1.07 | 72.6 | 7.3 | 5.55 |
| % change | +12 | -31 | -38 | +5 |
| Ex-div: | 5 Sep | |||
| Payment: | 4 Oct | |||
| *Includes intangible assets of £2.3bn, or 334p a share. **Does not include lease liabilities of £106m. | ||||
