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Strong order growth for Meggitt

The aerospace and defence group successfully converted strong organic order growth into revenues
February 28, 2018

Meggitt’s (MGGT) full-year sales were buoyed by strong organic order growth, while the ratio of orders received to revenue recognised was an encouraging 1.03 times – up slightly on last year. More impressively, free cash flow climbed 42 per cent to £186m. This stemmed from lower working capital outflows, as Meggitt focused on inventory reduction, and as research and development costs fell.

457p

Civil aerospace, accounting for more than half of group revenues, grew by 8 per cent on a reported basis.The 4 per cent organic growth derived from a small rise in original equipment revenue and a 6 per cent improvement in aftermarket revenue. The latter segment saw large jet sales climb 8 per cent, led by Boeing 737, 747 and 787 planes.

Military, representing roughly a third of Meggitt’s top line, nudged up just 1 per cent on an underlying basis. While original equipment revenue here rose, aftermarket revenues fell 3 per cent due to lower demand for fighter jet spare parts. But management is optimistic about future defence spending in the US – Meggitt's principal military market.

Analysts at Investec were reviewing forecasts at the time of going to print, but they previously expected pre-tax profits of £358m and EPS of 35.1p for 2018.

MEGGITT (MGGT)   
ORD PRICE:457.1pMARKET VALUE:£3.5bn
TOUCH:457-457.3p12-MONTH HIGH:530pLOW: 409p
DIVIDEND YIELD:3.5%PE RATIO:10
NET ASSET VALUE:329p*NET DEBT:37.7%
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20131.6426929.412.75
20141.5520922.013.8
20151.6521023.214.4
20161.9919622.115.1
20172.0326245.215.9
% change+2+34+105+5
Ex-div:22 Mar   
Payment:04 May   
*Includes intangible assets of £2.6bn, or 337p a share