Meggitt’s Young Seeks Deals to Make Energy Third Business PillarRobert Wall
Meggitt Plc, the largest provider of wheels and brakes for military aircraft, is looking for acquisitions to bolster its energy business and make the segment a stronger contributor to revenue.
“We would like to see it as a genuine third leg of the business,” Chief Executive Officer Stephen Young said today in a telephone interview, adding the company wants to grow sales from its energy division to as much as 30 percent of group revenue from 17 percent.
Acquisitions will focus on sensors and valve technologies and the company has reduced debt to provide cash for purchases, Young said. Net debt as of June 30 fell 12 percent from a year earlier to 700.9 million pounds ($1.1 billion). Young, appointed CEO in May, said in March that the company was ready to strike deals following any decline in the price of aerospace assets that may result from cuts in the U.S. defense budget.
The company will rely on organic growth for its heat-exchanger business used on off-shore gas rigs and similar platforms, Young said.
Meggitt advanced as much as 3.7 percent, the most in a month. The shares traded 0.4 percent higher at 556 pence as of 9:30 a.m. in London. The stock has advanced 46 percent this year valuing the company at 4.4 billion pounds.
Meggitt continues to pursue contracts on airline platforms with the next target the Boeing Co. 777X, a rewinged replacement of the largest twin-engine wide-body the U.S. planemaker plans to introduce around the end of the decade, Young said.
Meggitt said today it won a contract to provide fuel systems for the S-92 helicopter, made by United Technologies Corp.’s Sikorsky unit, with deliveries from 2015 through 2030. Meggitt will also provide fire protection equipment to the Russian MS-21 narrow-body, it said.
Civil aerospace sales, which account for about 45 percent of group revenue, were driven by high production rates at Boeing and No. 2 planemaker Airbus SAS, Young said. Deliveries on regional and large business jets should see growth this year, he added.
Sales of spare parts, which had lagged as airlines deferred spending, showed “modest recovery” in the second quarter, Young said. The company reaffirmed its full-year guidance for mid-single-digit sales growth.