TIDMMGGT
RNS Number : 5679K
Meggitt PLC
23 April 2020
23 April 2020
This announcement contains inside information for the purposes
of Article 7 of the Market Abuse Regulation (EU) No 596/2014.
Meggitt PLC - First quarter trading statement and Covid-19
update
Meggitt PLC ("Meggitt" or "the Group"), a leading international
company specialising in high performance components and sub-systems
for the aerospace, defence and energy markets, today issues a
trading update providing: further details of the measures being
taken to protect our people and our business in this challenging
period; a summary of the Group's financial and operational
performance during the first quarter and; an update on our funding
and liquidity position.
Safeguarding our people and our operations
Our priorities are to safeguard the health and wellbeing of our
employees and to continue to support our customers, suppliers and
the communities in which we operate across the globe. In support of
this, we have implemented a number of proactive measures across the
business which comply with local and national guidelines issued by
government and health authorities.
Our operational plans are working well and the response of our
employees has been outstanding. The majority of our manufacturing
facilities remain open to continue to support the critical markets
that we serve in Defence, Energy and in Aerospace for repatriation
of citizens and transport of food, freight and medical supplies.
Our Defence portfolio represents a significant part of the Group's
revenues and is performing strongly as work on key defence
programmes continues as scheduled.
First quarter trading performance
While trading in the first quarter of 2020 was ahead of the
comparative period, in the last few weeks we have started to see a
softening in our civil aerospace business both in terms of revenue
and the forward order book.
Group revenue was up 5% on an organic basis in the first
quarter, with strong growth in defence more than offsetting a
softer performance in civil aerospace and energy.
Civil aerospace revenue was slightly ahead of the comparative
period on an organic basis, within which original equipment revenue
decreased by 1% and aftermarket revenue grew by 2%, with good
growth in both OE and AM in business jets.
Defence revenue increased 15% organically, driven by
particularly strong growth for original equipment. We continue to
see good order flow and expect demand in this part of the business
to be robust throughout 2020.
Energy revenue was 3% lower than the comparative period.
Impact of Covid-19 and actions to reduce cash expenditure and
our cost base
Covid-19 will result in a significant reduction in demand across
our civil aerospace business in 2020 in both OE and AM, as our
customers adapt and scale back their activities to reflect the
reduction in global air traffic.
We have modelled a number of scenarios for planning purposes
based on a combination of actual and anticipated customer demand
signal changes and external industry forecasts, including those of
IATA. We have also assumed that demand remains robust across our
defence business, which represented 36% of the Group's revenues in
2019, of which over 70% is derived from the US.
To mitigate the reduction in demand, we have already taken
action to reduce variable costs including accessing furlough
schemes where available and reducing temporary labour. While we
recognise the need to retain flexibility as demand patterns develop
over the coming months, we have taken the difficult decision to
reduce the size of our global workforce by around 15%, subject to
ongoing consultation in the regions in which we operate. This
action will ensure that our internal capacity across our civil
aerospace business reflects the reduction in demand and positions
us appropriately as we enter 2021.
We are also implementing a number of other measures to reduce
our operating cost base in 2020. These include: a freeze on all new
hiring; removal of annual salary increases for all employees;
material cuts in operating costs; and, for the second half,
reducing fees for our Non-Executive Directors and salaries for our
CEO, CFO and Executive Committee by 20%.
In addition, we are also taking a number of cash specific
actions including significant reductions in both capital
expenditure and inventory. This is in addition to the cancellation
of our final dividend payment for 2019 (as announced on 27
March).
The successful implementation of these combined measures
throughout the year will be to reduce our cash expenditure levels
by around GBP400m to GBP450m in 2020.
Financial and liquidity position
At the end of the first quarter, we had GBP1,671m of committed
facilities in place providing headroom of GBP668m. On 22 April,
Meggitt was confirmed as an eligible issuer under the UK
Government's Covid Corporate Financing Facility (CCFF).
Medical ventilators
As previously announced, Meggitt continues to work within the
VentilatorChallengeUK consortium to increase the supply of
intensive care medical ventilators needed to treat patients
hospitalised with Covid-19.
Outlook
In light of a highly fluid market and global macro-economic
situation, it remains the Board's position that it is too early to
provide forward looking guidance at the current time.
We will continue to monitor external events and keep the market
updated on developments as appropriate.
Information regarding our Annual General Meeting, which takes
place today, can be found on our website: http://www.meggitt.com
.
Enquiries:
Tony Wood, Chief Executive
Louisa Burdett, Chief Financial Officer
Mathew Wootton, Vice President, Strategy & Investor
Relations
Meggitt PLC
Nick Hasell, Managing Director
Alex Le May, Managing Director
Dwight Burden, Managing Director
FTI Consulting
Tel: +44 203 727 1340
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END
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