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INTERVIEW Meggitt expects civil aerospace upturn to last three to four years


LONDON (AFX) - Aerospace and defence engineer Meggitt PLC said it expects the upturn in the civil aerospace market to last for another three to four years.

Chief executive Terry Twigger said he anticipates the big aircraft manufacturers to continue to enjoy good production rates from now until at least the end of 2007 and probably in 2008 as well.

Large jet production is expected to increase by 21 pct in 2006 and 11 pct in 2007. Asia Pacific is driving demand at the moment and would continue to do so in the next two to three years, Twigger said.

Meggitt also expects the bigger US airlines to recover from their problems and to start ordering new jets again in the medium term, if only to replace existing aircraft reaching the end of their lives, he said.

"It looks well set for the next three to four years," Twigger told AFX News in a telephone interview.

Meggitt said the sustained recovery in the large civil jet market and continuing healthy military demand had contributed to a 29 pct rise in annual underlying pretax profit to 116.3 mln stg on a similar increase in group turnover to 616.3 mln stg, with strong organic growth supplemented by acquisitions.

Market forecasts for pretax profit in 2005 had been around 110.56 mln stg, on revenues of 606.63 mln stg.  

Meggitt also reported underlying pretax profit from continuing operations of 88.1 mln stg, up from 70.7 mln in 2004.

The board declared a final dividend of 5.3 pence, up 10 pct, for a total dividend of 7.7 pence, also up 10 pct.
 At the end of December 2005, the group's order book was up 30 pct on December 2004 at constant exchange rates.

Meggitt's aerospace businesses account for 74 pct of group turnover and 82 pct of underlying operating profit.

Turnover in the aerospace activities increased by 36 pct to 458.6 mln stg, up 38 pct at constant exchange rates, while underlying operating profit increased by 37 pct to 107.2 mln stg, rising 43 pct at constant exchange rates.

Revenues in the group's defence systems operations, which serve markets for weapon training systems, ammunition handling, environmental control systems for military applications and launch and recovery systems for countermeasures, increased by 25 pct to 86 mln stg from 68.9 mln stg previously.

Underlying operating profit increased by 19 pct to 14.7 mln stg compared to 12.3 mln stg beforehand. At constant exchange rates the increase was 19 pct.

In electronics, turnover increased by 1 pct to 71.7 mln stg, but underlying operating profit fell by 2.3 mln stg to 8.7 mln stg, down by 2.1 mln stg at constant exchange rates.

Twigger said trading in the electronics businesses is likely to remain soft for at least the first half of 2006 as medical customers continue to destock.

He said Meggitt had realised 7 mln stg of savings from its acquisition in 2004 of the aerospace design and manufacturing operations of Dunlop, at the upper end of expectations at the time of acquisition, which is expected to increase to 10 mln stg in 2006 as further consolidation occurs.

"With the Dunlop acquisition fully integrated and trading in line with expectations, we look forward to continued growth in 2006," he said.

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