The weak pound helped Meggitt (MGGT) beat expectations for 2016 with investors further buoyed by president Donald Trump's plan to ramp up military spending.
The shares are up 12.5% to 468p . Full year results reveal revenue up 21% to £1.99bn and underlying pre-tax profit ahead 13% to £352.1m, above consensus at £340m. The dividend is hiked 5% to 15.1p.
Organic revenue, excluding the impact of the newly acquired businesses and currency tailwinds, rose 1% but the company says it can do better in 2017, targeting organic revenue growth of between 2% and 4%.
R&D SPEND STARTING TO WIND DOWN
The results also benefit from a reduction in R&D spending, something we talked about last year. Meggitt had been spending heavily after winning work on a number of new aircraft programmes in recent years.
Now it should be positioned to reap the benefits of that investment.
Morningstar equity analyst Jeffrey Vonk says: 'The first effects of the end of Meggitt’s high-investment phase were already visible in the 2016 results, as R&D as a percentage of sales decreased to 7.9%, down from 9.5% in 2015. In 2017 and beyond, we expect R&D costs to decrease even more.'
