Meggitt organic profits fall as underlying orders remain depressed

Aerospace and defence engineer Meggitt reported a 6% fall in underlying profits for the first half of the year as orders declined before an expected rebound in the second half.

Group orders of £966.8m in the first six months of the year were down 2% at an organic level, having fallen 1% in the first quarter and many analysts having expected a modest improvement in the second.

However, thanks to the weakness of the pound, orders at the reported level were up 6% and revenues of £968.1m were 10% up on last year.

Underlying earnings before interest, tax, depreciation and amortisation of £228.4m were down 2% organic and up 7% reported, with profit before tax of £157.4m down at the organic level but up 4% reported.

Earnings per share rose 1% to 15.5p and, with strong free cash in-flow of £19m, an interim dividend of 5.05p was declared, up 5% year on year as management expressed confidence about the second half and further in the future.

Chief executive Stephen Young said the results were in line with internal expectations, with revenue helped by favourable currency movements and organic growth in our civil aerospace business partly offset by lower energy revenues.

"We continue to expect stronger growth in the second half with a corresponding improvement in margin," he said, reiterating guidance for 2-4% organic revenue growth and operating margin of 19.1-19.4% for the full-year.

"Over the medium term, we are set to benefit from improving conditions in many of our end markets and the strategic investments we have made in the business over the past five years.

"We continue to focus on accelerating progress on our key operational initiatives, which we expect will deliver a 200 to 250 basis point net improvement in operating margin and £200m incremental cash from increased inventory turns by 2021."