Engineering group Meggitt (MGGT) delivered 8 per cent organic revenue growth in 2019, exceeding the upgraded 6-7 per cent guidance range it had provided in November. The defence division, which accounts for over a third of group revenue, reported like-for-like sales growth of 11 per cent, propelled by higher demand for parts for the F-35 Joint Strike fighter jet and M1A Abrams tank. Yet with the ongoing production halt of Boeing’s 737 Max jet and now the fallout from coronavirus, the group expects overall organic revenue growth to drop to between 2 and 4 per cent this year.
The grounding of Boeing’s flagship aircraft was not the only challenge in 2019. Supply chain disruption created a production backlog in the second half, while there was a greater weighting towards lower-margin original equipment sales versus aftermarket services. Still, underlying operating profit rose 10 per cent to £403m, with the margin maintained at 17.7 per cent. The value of orders increased by a tenth to £2.5bn, benefiting from multi-year contract wins across key market segments.
Gross capital expenditure already increased by over a quarter to £94m in 2019 and is expected to rise to between £120m and £140m this year as the group ramps up investment in its new headquarters and expands its carbon furnace capacity. So while free cash flow surged by 60 per cent to £268m last year, it is expected to fall in 2020.
The Bloomberg consensus forecast is for adjusted pre-tax profit of £373m and EPS of 39.2p in 2020, rising to £422m and 44.1p in 2021.
| MEGGITT (MGGT) | ||||
| ORD PRICE: | 576p | MARKET VALUE: | £4.5bn | |
| TOUCH: | 576-577p | 12-MONTH HIGH: | 702p | LOW: 484p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 318p* | NET DEBT: | 37%** | |
| Year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 1.65 | 210 | 23.2 | 14.40 |
| 2016 | 1.99 | 196 | 22.1 | 15.10 |
| 2017 | 1.99 | 228 | 37.8 | 15.85 |
| 2018 | 2.08 | 216 | 23.2 | 16.65 |
| 2019 | 2.28 | 287 | 28.8 | 17.50 |
| % change | +10 | +33 | +24 | +5 |
| Ex Div: | 19-Mar | |||
| Payment: | 01-May | |||
| *Includes intangible assets of £2.5bn, or 320p a share | ||||
| **Includes lease liabilities of £153m | ||||
