Meggitt warns of a 15% decline in H1 organic revenue as COVID-19 weighs on demand
- Meggitt warns of a 15% decline in H1 organic revenue as COVID-19 weighs on demand.
- The British engineering company sees a 30% hit to H1 revenue from its civil aerospace unit.
- The Coventry-based firm sold its U.S. subsidiary for £116.56 million in the first week of June.
Meggitt plc (LON: MGGT) expressed confidence on Thursday that early signs of recovery are now starting to show in demand from the airline industry after a financially challenging first half (H1).
In a trading update on Thursday, the FTSE 250 listed company said:
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“In recent weeks, initial signs of a recovery in commercial aerospace have emerged, with commercial airlines bringing more of the fleet back into service and business jet activity increasing in the U.S.”
Shares of the company were reported 2.5% up in premarket trading on Thursday and jumped another 6% on market open. At 321 pence per share, Meggitt is more than 50% down year to date in the stock market after recovering from an even lower 217 pence per share in the first week of April. Learn more about how to choose winning stocks.
Meggitt estimates a 30% decline in revenue from civil aerospace
The British engineering company offers follow-on services and manufactures components like sensors and braking systems for planemakers including Airbus and Boeing. In the first half of the ongoing financial year, Meggitt said that its civil aerospace business is expected to see a 30% decline in revenue.
Across all units combined, however, the company estimates a much lower 15% decline in its organic revenue in H1, thanks to a robust performance from its defence business despite COVID-19 related travel restrictions that weighed heavily on commercial airlines in recent months. Meggitt’s civil aerospace accounted for 54% of its total sales in 2019 while the defence unit made up 36% of the sales.
Meggitt sells its U.S. subsidiary for £116.56 million
The Coventry-based company, however, cited the ongoing health crisis as it highlighted that its outlook for the second half remains uncertain. The company has been committed to boosting its liquidity in recent months to cushion the economic blow from COVID-19. It expressed plans of cutting roughly 1,800 jobs in April and raised £116.56 million as it sold its U.S. subsidiary, Meggitt Training Systems, to Pine Island Capital Partners (U.S. private investment firm) in the first week of June.
The layoff, Meggitt said on Thursday, is proceeding as planned. Meggitt performed fairly upbeat in the stock market last year with an annual growth of about 40%. At the time of writing, the UK-based international engineering company has a market cap of £2.50 billion and a price to earnings ratio of 11.21.