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Last updated: March 4, 2014 4:21 pm
Shares in Meggitt rose after the FTSE 100 engineering group gave an upbeat outlook for this year and boosted its dividend by 8 per cent on the back of a buoyant civil aviation industry.
Meggitt, which provides aircraft parts such as wheels, brakes and sensors to customers including Airbus and Boeing, on Tuesday reported full-year revenues up 2 per cent to £1.63bn.
The company’s results were largely in line with analyst expectations after Meggitt lowered its profit forecast in November to single-digit growth following “growing pains” in its energy business.
Stephen Young, who took over as Meggitt’s chief executive last year, said the company was affected by two main headwinds in 2013: currencies and slow after-market recovery.
While revenues at Meggitt’s civil aerospace division rose 4 per cent on an organic basis, most of this growth was driven by an 11 per cent rise in sales of original equipment as strong demand for new aircraft continued. Its after-market business was flat.
Mr Young said civil after-market recovery last year was slower than expected. However, the company expects growth to return this year, forecasting a 5 to 6 per cent rise as the destocking seen in recent years comes to an end.
The company has increasingly turned its focus to areas such as energy, diversifying from its reliance on a defence industry that has been stifled by the drawdown of western operations in Iraq and Afghanistan.
It expects its energy business, which represents around 10 per cent of the group’s overall revenues, to grow by around 10 per cent this year.
The aircraft parts maker increased its dividend 8 per cent in what it said was a sign of its confidence in future performance.
Pre-tax profit for 2013 was down 4 per cent at £269m, largely because of a £20m hit to cover costs associated with a raw material supply issue that will require it to replace parts in products it sold last year.
Underlying profit was up 3 per cent, while earnings per share were 28.9p compared to 29.7pm in 2012. The 2013 dividend jumped to 12.75p from 11.80p the year before.
Nick Cunningham, analyst at Agency Partners, said Meggitt was being particularly positive about the medium term, noting that it was looking for 6-7 per cent organic growth.
“The medium term is a flexible concept but we think OE [original equipment maker) growth will slacken beyond 2015 and then reverse,” he said in a note. Several analysts believe Meggitt’s share price is high compared with its performance and its peers, with several recommending their investors sell.
Meggitt’s shares rose 2.9 per cent in morning trading to 509p.
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