Meggitt boosts savings and looks forward to aerospace market improvement
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Meggitt, the international engineering group specialising in aerospace, defence and energy markets, reported today (3 August) that it was on track to exceed its £50m savings target and expected its civil and military aerospace markets to improve in the second half of the year.
Announcing its financial results for the six months ended 30 June, Meggitt said leading indicators for its civil aerospace business continued to improve and order intake from the beginning of Q2 had shown a steady increase and its civil revenues should return to growth later in the second half on the back of the improving order intake.
Military revenues, slightly down as a result of delays in placing orders, were also expected to recover in the second half.
Chief executive Terry Twigger said trading conditions in the first half had remained challenging but, as expected, there were early signs of recovery in the company's civil markets. "The leading indicators for our civil aftermarket (air traffic and business jet utilisation) continue their strong recovery and have started to show up in increased order intake," he went on. "Our cost reduction programme has continued to make excellent progress, demonstrated by the improvement in our operating margins and we are on track to exceed our cost reduction targets by 10%."
Revenue for the half year dipped 6% to £549.7m while pre-tax profit was up 3% at £116.2m.
Of Meggitt's revenues, 43% is generated from the civil aerospace market, 43% from the military market and 14% from other markets, primarily energy.
The original £50m identified savings which the company now says it will exceed are comprised of: £25m from reductions in headcount; £20m from removing a layer of management; and £5m from freezing executive pay.
Meggit said that cost saving was just one benefit from its transformation programme. Others included standard business processes, common IT platforms, centres of excellence in engineering, shared services in IT and administration and better customer relationships.
Contract wins in the last six months included a tyre pressure indicating system for Bombardier's CSeries aircraft; a $12m upgrade contract for blast-resistant fuel tanks for fighting vehicles; the development of a braking system on the MC-21, the new Russian narrow body aircraft; sealing solutions for the Airbus A350 XWB; and assemblies for Agusta Westland's AW159 Lynx Wildcat (pictured) helicopter programme.
