‘Sector specific factors including the production halt of the 737 MAX and supply chain disruption, as well as the wider macroeconomic impact of COVID-19 are expected to hold back margin progression in the short-term’, the company said on Tuesday.
More worrying for investors, Meggitt also admitted that it expects ‘the effect of these sector-specific and macroeconomic factors to be felt beyond 2020.’
The news saw Meggitt shares tumble close to 4.5% to 568p, heading the FTSE 100 loser board on Tuesday.
RESPECTED CHAIRMAN TO STAND DOWN
Adding to the blow was news that chairman Sir Nigel Rudd plans to stand down from the board by the annual general meeting of 2021, although he will remain chairman until a successor has been found.
Rudd, who was appointed chairman in 2015, is highly respected in City circles having had a long and successful career in British manufacturing. He founded Williams Holdings which went on to become one of the largest industrial holding companies in the UK until its demerger in November 2000, creating Chubb and Kidde. He has also held chairman positions at BAA, Boots, glass maker Pilkington and was previously deputy chairman of Barclays (BARC).
These factors overshadowed what appear to be robust annual results for the year to 31 December 2019, which showed headline pre-tax profits jumping 33%, or 11% on an underlying basis.
Pre-tax profit for 2019 rose to £286.7m, up from £216.1m on a 9% revenue increase to £2.28bn, while the order book increased 10% to £2.47bn.
Meggitt declared a full year dividend of 17.5p per share, up 5% on-year.
FUTURE PROGRESS CAPPED
The company said organic revenue growth in 2020 would be limited to 2% to 4% thanks to the coronavirus and 737 MAX grounding. Underlying operating margin was seen rising 30 to 50 basis points.
Looking even further ahead, Meggitt said it expected to deliver low to mid-single digit organic revenue growth in 2021 and underlying operating margins of between 18.5% and 19%.