Meggitt CEO retires, confident despite bumpy third quarter

Defence supplier Meggitt said that chief executive Stephen Young will retire next April as it reported slower progress in civil aerospace and a decline in military revenue in the third quarter.

However, the FTSE 250 group assured that it was still on track to hit full year targets thanks to recent strong order growth and that highly experienced operations chief Tony Wood will be promoted to the CEO job.

Revenues in the third quarter were flat on an organic basis, as they were in the first half of the year, with just 4% growth from civil due to the slower ramp-up of civil aerospace programmes, while military was hit by a dip in orders and spares.

On a reported basis, revenue fell 2% when including the effects of M&A and foreign exchange, with the pound-dollar exchange rate stronger than last year in this quarter.

Revenue growth accelerated in civil to 4% on an organic basis in the quarter, driven mainly by large jets, though the slower ramp-up is likely to continue into the fourth quarter.

On the upside, while military revenues decreased 5% organically in the third quarter, the fourth quarter is expected to be a strong one, underpinned by good growth in orders on platforms such as F/A-18 fighter jet and Apache helicopter.

In energy, as expected, the rate of decline slowed with revenue down 8% on an organic basis in the quarter, from 14% in the first half.

As a result, management said the group "remains on track to meet its full year guidance for organic revenue growth" of 2-4% and underlying operating margin improvement of 19.1-19.4%.

"Meggitt remains on track to meet full year guidance and we are pleased with progress across the business despite challenges in some of our end markets," said Young, who has been at the company for 14 years.

"Growth accelerated in civil aerospace during the third quarter and we expect to see further improvement in the fourth quarter, particularly in military where we have seen strong order growth in the last three months. Our key strategic initiatives continue to deliver and we are well positioned for the future."

On his replacement CEO, Young highlighted Wood's "important contribution" since going last year, "bringing significant operational expertise, broad leadership experience gained over 30 years in senior aerospace roles and a fresh perspective which has and will continue to accelerate momentum across our strategic initiatives."