Meggitt predicts takeover will complete as probe report looms

3rd Mar 2022 08:49

(Sharecast News) - Meggitt said it expected its takeover by a US rival to complete despite a competition investigation as improving market conditions helped the engineer return to an annual profit.

Pretax profit for the year to the end of December was £31.3m compared with a £334m loss a year earlier as revenue fell 12% to £1.49bn. Underlying pretax profit fell 6% to £149.3m and organic revenue dropped 5%.

The company agreed to be bought last year by US rival Parker Hannifin for £6.3bn, or 800p a share, in the latest purchase of a UK aerospace supplier. Britain's competition regulator is investigating the takeover and is due to report to the government on 18 March.

The deal raised concerns about the sale of another engineer after Melrose's acquisition of GKN and the takeover of Ultra Electronics by Cobham. Meggitt's customers include Rolls-Royce, Boeing and BAE Systems.

The Coventry-based group said on Wednesday it expected the deal, approved by shareholders in September, to complete in the third quarter and that it would reduce risk for the company with uncertainty hanging over the recover in the civil aerospace market.

Shares of Meggitt were down 0.2% to 762.4p at 09:37 GMT. The shares are up 77% in the past year but are trading almost 5% below Parker Hannifin's offer price.

The company said organic revenue rose 8% in the second half. Civil aerospace aftermarket revenue rose 7% on an organic basis and 58% in the final quarter. The company's results also benefited from the absence of writedowns made during the early stages of the Covid-19 crisis.

Meggitt said: "The group remains strongly positioned, with a compelling strategy which the board believes can deliver attractive value for shareholders over the long term as our key markets, particularly commercial aerospace, recover. At the same time, however, there remains significant uncertainty as to the precise timing and speed of that recovery.

"While we have continued to see encouraging signs of the recovery in civil aerospace during 2021, with overall activity levels rising, an increase in civil aftermarket organic revenue and sequential increases in quarterly civil aerospace organic revenue, the group's full year results reflect the ongoing effects of Covid-19 and global supply chain disruption."