Meggitt issues profit warning after aerospace and energy markets dip
Meggitt warned that full year profits will be well below forecasts after the aerospace and industrial components supplier endured softer trading during the third quarter, with a "marked deterioration" in its end markets in September.
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Operating profit for the year will be "meaningfully below" the current consensus estimate of £369m, the FTSE 100 company said, with the weakness in the third quarter spreading into the fourth.
Analysts at Investec estimated that full year 2015 consensus earning per share (EPS) will likely come down by roughly 10%, and by more in 2016.
In an attempt to reduce the impact, more restructuring and cost-cutting measures have been put in place, with 300 staff cuts ti be made worldwide and costs taken as a one-off in the next financial year.
In the third quarter there was organic growth - which excluding the effects of M&A and foreign exchange - in civil original equipment of 2% but this was more than offset by weaker than expected flat trading in civil aftermarket, slower 2% sales in military and a 16% decline in energy, resulting in an organic decline of 1% in the quarter.
Profitability in the third quarter was hit by product mix across end markets and within the aftermarket following lower than anticipated spares volumes for older civil and military aircraft, with pressure on profit margins also from lower volumes and a number of customers delaying contracts. Energy markets are continuing to weaken, too.
"Clearly the current market weaknesses we are experiencing are very disappointing," said chief executive Stephen Young. "In response, we are taking further action to reduce the cost base. We continue to invest in delivery against the many new programmes we have won in recent years, and remain confident in the medium to long-term strategic direction and financial performance of the group."
Investec analysts said the decline in energy suggested that weakness in this market was no longer limited to Heatric, but has spread to other businesses.
"We believe 'meaningful' implies a circa 10% cut to FY15 consensus EPS and we expect a larger cut to FY16," they said, adding that the lower EBITDA will means year-end net debt/EBITDA will be higher than previous guidance for 2.1 times.
Shares in Meggitt were down 22% to 359.50 by 0900 on Wednesday.